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‘Linkage Fee’: Plan to make developers fund affordable housing moves forward

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The next and final stop might be the City Council

An affordable housing complex built in Hollywood by LAUSD, which endorsed JJJ
An affordable housing complex in Hollywood.
Courtesy of Abode Communities

A plan to make developers help pay for affordable housing took another key step forward Tuesday. The Los Angeles City Council’s Planning and Land Use Management Committee approved a draft ordinance that would require commercial and residential developers to pay a fee of up to $15 for every square foot of new construction.

Revenue would be funneled into a Housing Impact Trust Fund “to address the evolving and varied affordable housing needs of the city,” including the construction of new units deed restricted to tenants with qualifying incomes. The fees are expected to generate $75 million to $92 million per year.

“Our goals for this linkage fee ordinance are to get at homelessness before it has a chance—to use the hundreds of millions of dollars the ordinance will generate to keep people in their homes and protect affordable housing covenants set to expire, as well as to build new affordable homes for workers and families,” said Los Angeles City Councilmember Jose Huizar, who chairs the PLUM committee.

It’s estimated that the entire county needs 551,807 new units of affordable housing to satisfy demand from very low and extremely low-income earners.

PLUM voted in August to support a “linkage fee,” a tool that’s already used in other major California cities from San Diego to San Francisco.

Tuesday’s 4-1 vote was more technical, a decision on the draft ordinance, which now heads to the Housing Committee and then the City Council for final approval. (The housing committee could opt to waive its hearing, allowing the council to consider it sooner).

It calls for the highest fees to be levied on housing developers in “high market” areas, such as Venice, Hollywood, and Downtown LA. In those areas, housing developers would pay $15 per square foot, while developers building hotels and other commercial projects would pay $5 per square foot.

These are the fees that developers would pay, based on the type of development and the location.
via city planning department

If approved by the City Council, the fees wouldn’t be assessed right away—and that drew criticism from at least one committee member.

Under the draft ordinance, developers wouldn’t have to pay the full fees until 305 days after it goes into effect. For the first 120 days, they’d pay no fees at all. In the time in between, they’d pay half.

“Every day that we wait, the housing crisis expands,” said councilmember Marqueece Harris-Dawson. “​I am against a phase in ... This policy is too important, and the longer we wait, more families will slip through the cracks.”

This map shows the market areas for residential development. The highest fees will be assed in “high market areas.”
via city planning department
This map shows the market areas for nonresidential development.
via city planning department

Linkage fees are widely supported by nonprofit affordable housing developers and housing advocates. But they are opposed by developers and the building industry, including the Los Angeles Area Chamber of Commerce.

Opponents say the fees will dissuade developers from building new housing at a time when Los Angeles sorely needs it. Jeffrey Lee Costell, a lawyer representing the Building Industry Association of Southern California, told the committee the fees would lead to a further decrease in the housing supply, “putting upward pressures on rent.”

UCLA urban planning professors Paavo Monkkonen and Michael Manville have recommended the city lower the fees proposed for residential construction and hike the fees proposed for commercial construction.

“If we must have a linkage fee, we should recognize that LA does not a have a commercial development crisis, but it does it have a housing crisis,” they wrote in a letter to the City Council last month. “So it may be wise to levy a steeper fee on commercial development than residential development.”

But the proposed fees are on the very low end—and even lower—than what an economic report commissioned by the city found it could charge without “constraining private sector development.” Published in September, the report concluded that the fees could vary from $5 to $35 per square foot for commercial and $19 to $49 per square foot for residential.

The dissenting vote was cast by councilmember Mitch Englander, who wanted to tweak the draft ordinance’s section on exemptions for nonprofits. His spokesperson told KPCC that he “may ultimately vote for the linkage fee” when it’s up for a council vote.