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March 14, 2017 > Linkage Fees, what are they?

Linkage Fees, what are they?

By William Marshak

Funding for affordable housing is a continuing challenge for communities throughout the Bay Area. With the passage of Measure A1 in November 2016 by 73 percent of voters in Alameda County, significant monies Ð bonds totaling $580,000,000 - will be available in the next eight years. Cities have also imposed inclusion requirements or in lieu fees from developers earmarked for affordable housing. Another such fee is called a Òlinkage feeÓ that is connected (a ÒnexusÓ) by the impact of new commercial construction and its associated need for employees and housing. Tri-City Voice asked Dan Schoenholz, Deputy Director of Community Development for the City of Fremont about Linkage Fees and whether the City is considering imposing them on future commercial development.

TCV: What is your role in the City of Fremont and how does that relate to Linkage Fees?

Schoenholz: Community Development includes affordable housing; I oversee that group. Linkage fees are intended to fund affordable housing. So when the City decided to look at linkage fees, this fell within my area of responsibility.

TCV: What are linkage fees?

Schoenholz: A fee intended to mitigate the effects of development.

TCV: This type of fee already exists, doesnÕt it?

Schoenholz: Yes. There are impact fees for parks, traffic and an impact fee on residential development. The study involved is to determine if there is a link between commercial development and increasing demand for affordable housing. We are getting less and less funding from the federal and state government, so we are looking at alternatives to provide local services.

TCV: Are other cities using commercial linkage fees?

Schoenholz: There are a number of communities in the Bay Area that have adopted linkage fees on commercial development. Peninsula cities such as Palo Alto, Cupertino, Sunnyvale, Mountain View; and six cities in Alameda County; for example Newark, Pleasanton, Oakland and Berkeley. Fees in Cupertino are $20 per square foot compared to Newark at $3.59 per square foot, the effect of Silicon Valley demand for office space where a high linkage fee does not discourage development.

TCV: How are fees determined?

Schoenholz: A nexus study is done to determine how the size and employee demand of a development will affect affordable housing demand. The City of Fremont was able to participate in a multi-jurisdictional, regional effort to examine affordable housing resulting in consistency between communities and cost savings through economies of scale. Although recommendations varied based on various factors, methodology and analysis was consistent.

TCV: Does a commercial linkage fee affect only new construction?

Schoenholz: In most cases, this fee would be imposed on new commercial development. Remodeling existing space would probably not be affected unless additional square footage, usage and employee impact changes significantly; that would be a policy decision. The legal consideration of a commercial linkage fee is whether the City can charge a fee and its limits. All other decisions are through policies set by the City Council.

TCV: When will this come to Council and will it affect developments already in progress?

Schoenholz: Probably this spring. If it is determined that a commercial linkage fee will be adopted, it will be a policy decision as to how and when it will take effect. Part of the nexus study by consultants Keyser Marston was to determine the effect of this type of fee. The recommendation of an amount that would not seriously affect development was $2-$8 per square foot depending on product type.

TCV: Will this income stream be significant to Fremont?

Schoenholz: It will add to our existing affordable housing revenue from market rate housing fees. Affordable Housing funds from Measure A1 will increase by $33 million, FremontÕs allocation for rental affordable housing and a portion of the South County allocation of $33 million. Our city council was also one of the first in the state to dedicate a percentage [in Fremont: 20 percent] of so called Òboomerang fundsÓ from the State of California due to the demise of redevelopment agencies. Due to funding streams, we have been able to support developments such as Laguna Commons (Very Low and Extremely Low units) that just opened, Mission Court (aka Parc 55) senior housing (90 units), Stevenson Family Apartments (80 units) and Habitat for Humanity (30 units). In Warm Springs, another affordable housing development called Innovia (290 units) by St. Anton in partnership with Lennar will be under construction soon.

TCV: This sounds like quite a bit of affordable housing activity.

Schoenholz: Yes, but on the flip side, each city is assigned a portion of housing needs for regional growth. For the period 2015-2023, Fremont has been asked to produce 1,714 very low income units, 926 low income units, 978 moderate income units and 1,837 above moderate income units. We have not met our Regional Housing Needs Assessment numbers; typically very few communities achieve their goals. However, an increase of our funding stream will help us come closer. Categories are defined by a percentage of Area Median Income (AMI) - $65,000 for an individual; $93,600 for a family of four in 2016. For example, Very Low Income is defined as a maximum of 50 percent of AMI and its subset of Extremely Low Income is at 30 percent or less of AMI.

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