Developers Bracing for L.A. Mayor's Proposed Affordable Housing Fee

Los Angeles Mayor Eric Garcetti's plan to raise millions of dollars for affordable housing by charging a new fee on real estate development looks like a foregone conclusion, says the head of the area's largest trade group for builders.

"This one's a freight train," said Randy Johnson, president of the Los Angeles/Ventura chapter of the Building Industry Association. "The mayor really wants it and there’s no one on the City Council that is going to go against it that I know of."

The mayor, who first proposed the fee in fall 2015 as a way to fund the much-needed production of below-market-rate housing, brought up his proposal again in his State of the City address last week. Garcetti urged the City Council to pass the fee "and do it now."

The proposal is reviving a debate over whether developer fees lead to more affordable housing or discourage housing development in the city. There may not be consensus on that issue, but most agree that there's an urgent need to address affordable housing in Los Angeles, where many spend over 50 percent of their income for a roof over their heads.

Ben Winter, the mayor’s housing policy specialist, said planners have been working to shape the proposal so council members can pass it this year.

"It’s gone through the analysis, through City Planning Commission and multiple hearings," Winter said. "So it’s ready to go, ready to rock 'n' roll."

Developers have expressed concerns over the fee at hearings, but they are not the only critics. City Controller Ron Galperin said imposing another fee on builders -- $12 per square foot on residential buildings, $5 for commercial -- isn’t going to help fix the city’s housing shortage.

"Just making it more expensive to build and charging that to those who are actually building more units is really counterintuitive," Galperin said.

He said the fee would not generate enough money to help the low-income households who could use the affordable housing. His office estimates that more than 90 percent of low-income households in L.A. live in market-rate housing.

The mayor’s office has tried to address concerns about the fee's impact on the cost of development by exempting smaller buildings, such as homes under 1,500 square feet, buildings with five units or less and second homes in the backyard.

Winter said developers also have the option to include a certain amount of affordable housing in their project rather than paying the fee.

The proposal will go before the council's Planning and Land Use Management Committee, led by Councilman Jose Huizar, before a vote by the full council.

In a statement from Huizar's office, the councilman said he "looks forward to a robust discussion" on the new fee and that his goal is to hear it "as part of a comprehensive affordable housing discussion related to land-use issues."

Galperin said another initiative by the mayor and the council mentioned in Garcetti's State of the City speech will boost housing production in a way a new fee can't. The mayor reiterated a plan to update the city's planning documents, many of them decades-old, which Galperin said will streamline the approval process for projects.