The Los Angeles City Council on Wednesday approved the imposition of linkage fees on developers of new residential and commercial projects to generate revenue for an affordable housing fund.
The Council voted unanimously to impose the linkage fees, which range from $1 per square foot of new development to $15 per square foot. The vote came despite opposition from business groups and developers who argued the fees would discourage new development in the city and that in many cases, they would be passed on to renters or owners of the new units.
Los Angeles Mayor Eric Garcetti, who made passage of a linkage fee the centerpiece for his plan to build new affordable housing units in the city, signed the ordinance at a press conference immediately after it passed the council. The fees would start to take effect next year and be fully implemented by mid-2019.
Backers, including affordable housing advocates, hope the fees will generate $100 million a year for the city’s affordable housing trust fund, giving that fund its first dedicated funding source. That would allow for the building of an estimated 1,500 new units of affordable housing a year, according to news reports quoting city data.
But how much the fees will actually generate each year will depend on overall market conditions and on the willingness of developers to continue to site projects in the city despite the fees.
“The city has long-needed its own funding source to ensure that our residents and families who have lived in Los Angeles all their lives, can continue to call the city that they love home,” Councilman Jose Huizar said in a statement posted to his website. “Our primary goal is to provide hundreds of millions of dollars 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.”
Under the plan the Council approved, office, hotel, retail and other commercial buildings in “low-market” areas such as South Los Angeles would be charged $3 per square foot. Commercial buildings in “high-market” areas such as downtown, Venice and Brentwood would be assessed a linkage fee of $5 per square foot. Institutional buildings, such as schools and hospitals, would not be subject to the fees.
The fees go much higher for developments with residential components, including mixed-use multifamily buildings and single-family detached homes. The fees start at $8 per square foot in low-market areas and increase to $15 per square foot in high-market areas.
Very small residential projects of five units or less in low- and medium-priced markets will be assessed $1 per square foot. And any project that results in a net reduction of housing units compared to what was previously there will be assessed an additional $3-per-square-foot fee.
Residential developers can avoid these fees if they agree to set aside certain percentages of units in their projects for low-income renters; however, that option would not exist for developers of purely commercial buildings.
Economy, education, energy and transportation reporter Howard Fine can be reached at email@example.com. Follow him on Twitter @howardafine.