The Sacramento City Council took a decisive step toward encouraging and supporting more affordable housing by waiving the city’s development fees for affordable housing projects.

The Oct. 30 vote to waive the fees was a direct response to the housing crisis affecting the Sacramento area and the elimination of redevelopment agencies that had previously supported the development of affordable housing within the city.

“Funding for affordable housing has fallen dramatically since the dissolution of the state’s redevelopment agencies in 2012, and as a result, affordable housing production has dropped precipitously,” the Sacramento City Council report said.

To qualify for the fee waiver, projects must be multi-family structures restricted as affordable to residents making less than the city’s median income. The fee waiver will not increase the fees on market-rate housing projects, but will decrease revenue to the city by approximately $1 million per year.

Development fees have come into focus as one way that municipalities can attract private investors to develop new housing for residents who are unable to afford market-rate housing, which can often be out of reach for median and below median income earners. In fact, Tahoe-Truckee, market-rate housing is out of reach for those earning up to 195% of the median income (learn more here). Fees are important in an environment where construction and land costs are sky-rocketing, because they can be a deciding factor in a housing project with thin margins and a tight budget. Municipalities are examining options like fee waivers, fee deferrals, or scalable fees that are based on the size of units, number of bedrooms, or number of fixtures.

The Sacramento City Council report noted that under the fee waiver program, a 200-unit affordable housing project would save between $1.8 million and $2.7 million on fees, depending on which part of the city it was located in.

The Mountain Housing Council has finalized its own set of recommendations on development fees in Truckee-North Tahoe, suggesting ways that local government agencies can spur more achievable local housing investment by revising their development fee structure.

Learn more about Mountain Housing Council’s efforts here.

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