Housing’s high impact fees could go higher

Warehouse development charges could rise by nearly 90 percent

FREMONT >> Despite already charging among the highest impact fees in California, Fremont leaders are considering bumping such fees even more to help pay for parks, fire protection services and roads.

The majority of the Fremont City Council indicated during a meeting Tuesday it is in favor of increasing impact fees on both housing and commercial developers by roughly 4.5%, to keep pace with inflation, but noted it also would support giving developers who build affordable homes a break on such fees.

The council also signaled it would support levying a substantial fee increase — nearly 90% — on warehouse developments.

“We’re like the capital of ware

houses, so I definitely think we need to look at increasing the fees there so they’re competitive,” Councilman Raj Salwan said during the meeting.

City staffers said the city’s fees for warehouse development have been historically low compared with other cities’ commercial development fees, and the significant increase would bring the city more in line with the market.

In recent years, millions of square feet of industrial buildings set up for warehousing, distribution, manufacturing and research and development have gone up in a massive development south of the Pacific Commons Shopping Center in Fremont and landed major tenants including Amazon and UPS.

Though commercial fees likely will be raised with little fanfare, the city’s high fees on housing developers are what garner the city the most attention and could be affected by state lawmakers looking to place stricter limits on fees, city staffers said.

The city’s high fees have been called out in two studies in 2018 and 2019 from

the UC Berkeley Terner Center for Housing Innovation as some of the highest in the state, especially for single-family homes.

A developer of a threebedroom home in Fremont currently would pay about $33,000 in city impact fees alone to help cover the costs of new parks needed for additional residents, as well as fire protection fees, roads and other infrastructure improvements, according to city staff reports.

That figure doesn’t include other steep costs, such as the city’s affordable housing fees charged if a developer doesn’t build affordable units in his project and Fremont Unified School District’s fees to help accommodate more students from new housing projects.

In 2018, The Terner Center reported that when the full complement of fees are included, a developer building a single-family home could wind up paying just over $150,000 in fees in Fremont.

“There is a bit of a spotlight on Fremont right now with respect to fees on residential development,” Community Development Director Dan Schoenholz told the council Tuesday while referencing the Terner report from 2019.

“So this has resulted in Fremont sort of being

branded at the state level as a high-fee city, and the state is concerned that high impact fees will suppress housing development,” Schoenholz said.

Schoenholz said city staffers believe the high fees in Fremont are not “out of line with other cities in Silicon Valley,” despite some of the shocking figures seen in those reports.

“Also, our fees have to be higher than in a lot of areas around the state due to the high cost of acquiring land that we need to build parks and for Public Works projects,” he said.

Fremont currently aims to have have 5 acres of park space for every 1,000 residents, and Hans Larsen, the city’s Public Works director, said residents value park space as a high priority.

“We already have attention on Fremont as being a city that has high fees,” he said. “We think it’s somewhat justified, but nevertheless, our fees are higher, and higher fees do impact the cost of development,” he said.

Dennis Martin of the Building Industry Association Bay Area asked the City Council to consider easing the burden on developers by letting them pay their fees as late as possible in the development process, and to calculate the fees early on.

“Fees can have a significant effect on the feasibility of housing that goes forward. So we ask that you be careful and be mindful while adopting additional fees,” Martin said.

Despite high fees, over the last several years, Fremont has exceeded regional housing goals for marketrate homes by more than 5,000 units, though it has done very poorly in attracting homebuilders putting up units affordable to those in moderate income brackets, and the city also has struggled with low- and very low-income units.

The City Council expressed broad support for lessening the fee burden on developers building affordable homes, as they currently pay the same fees as a market rate builder, which can affect the number of affordable homes that are produced in the city, staff members said.

How much of a discount affordable builders could see is still up in the air. City staff members said that Fremont will host a meeting with “development stakeholders” on March 25, and the City Council likely will make a decision on all the fee rates at a meeting in May.