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New bill seeks to reduce cost, curb fee abuse on construction of new homes

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One of the staple sources of income for local governments is the fees they charge for building a home. Some believe those fees are partially to blame for the general unaffordability of California's housing.

In response, the California Assembly's Local Government Committee recently passed AB 2751, authored by Assemblyman Mark Wyland, which attempts to reduce the cost of new homes by limiting fees that local governments require when a new home is constructed.

"Housing costs in our state are as high as they are in part because of the excessive fees that local municipalities charge for every new home built," Wyland said in a release. "These fees create a disincentive for companies to build new homes, which constricts supply, and put homeownership just that much more out of reach for many buyers."

According to the California Association of Realtors, the percentage of households in San Diego able to afford a median-priced home was 9 percent in December 2005, compared with 11 percent for the same period a year ago. The percentage of households in California able to afford a median-priced home was 14 percent in December, compared with 19 percent in 2004.

Paul Tryon, president of the San Diego Building Industry Association, agreed that housing costs are high in the state in part because of local agency fees and governmental regulations. Fees alone, which could be for water, sewer, traffic, schools and other infrastructure, can account for $20,000 to $60,000 of a home price.

He also noted that fees assessed by cities within San Diego County are some of the largest in the state; however, many people don't recognize they're paying these fees when buying a home.

Existing law states that when a local agency imposes a fee as a condition of approval of a development, the agency shall determine how there is a reasonable relationship between the amount of the fee and the cost of the public facility attributable to the development.

This bill requires that fees charged by local governments on new homes be based only on the costs of improving public facilities directly related to that development.

The bill was written in response to cities and counties charging homebuyers fees for facilities and infrastructure that are not directly affected by new housing developments.

Tryon said there are many violations of the current law, providing an example of a situation in San Diego County when a city used fees to pay for new police academy equipment when the they where meant to go toward a new police station.

According to the language of the bill, these fees can add tens of thousands of dollars to the cost of a new home.

According to a study done by the BIA and a Northwestern University professor in 1999, fees imposed by local agencies (Carlsbad in this report) and governmental regulations account for on average 26 percent of a home's price based on an average sales price of $371,339.

Now with the March median price of a home in the county at $607,370, according to the California Association of Realtors, 26 percent would represent nearly $158,000.

Tryon pointed out that the amount of money homebuyers in the state pay regarding fees equals what some in other states are paying for their entire home.

Of the costs associated with these fees and regulations, direct and indirect expenses are the highest.

Direct costs, which in the report accounted for $41,886 of the $96,301 in fees, include discretionary application, final map recordation and building permit processes.

Indirect costs, which comprise $29,315 of the total fees paid, go toward inclusionary housing ordinances, planned development ordinances, community facilities, hillside development ordinance and other City Council policies.

While this bill will not change the amount of fees homebuyers pay, it will hold agencies accountable, which is a positive.

"It's about accountability -- that's all we've ever sought. We'll pay our fair share," Tryon said, adding that the bill has the potential to curb fee abuse.

Another part of the bill states that every five years cities must identify the purpose of various fees and how the fee will be used. If the use is financing public facilities, the facilities shall be identified.

Send your comments, thoughts or suggestions to erik.pisor@sddt.com

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