The City of Anaheim has been considering raising development fees as part of its budget hearings. Development fees on projects outside the Platinum Triangle – i.e. nearly the entire city – would undergo a massive increase.
According to this slide from a city, staff proposes 15% maximum increase in development fees. As you can see from this slide prepared by city staff, the increase for non-Platinum Triangle projects is more like 98%:
Councilman Steve Faessel used an approved 314-unit apartment project by Shopoff Realty Investments to illustrate the dramatic financial impact of the proposed fee increases. Shopoff’s existing fees for the apartment project are $2.8 million. Under the proposed fee schedule the project’s development fees would rise to $4.9 million – an increase of 78%. As Faessel pointed out, that is much higher than the promised 15% cap on increases.
Against this backdrop, an illuminating exchange took place between Mayor Pro Tem Jose F. Moreno and two gentlemen from the building industry. James O’Malley from Shopoff and Adam Wood from the Building Industry Association of Orange County had both objected to the draconian development fee increases.
This prompted Moreno to complain that all he ever heard from the building industry was a chorus of noes whenever increasing development fees was discussed:
“I guess I’m trying to figure out how we have a more engaged conversation where the response isn’t that we only hear “noes” when staff proposed something, and instead maybe we hear an idea of how do we improve the quality of life when you decide to build in our city.”
Adam Wood stepped to the podium and pointed out that government fees and regulations account for a 32% percentage of the price of a house, nationally. Raising development fees worsens makes housing less affordable because those increases are passed onto home buyers in the form of higher prices.
“It is our job to try and streamline things as much as possible – to say that when you’;re paying for a house, you should be paying for a house, not a process,” said Wood. “We’re always here to look for ways that we can make the value of your home what you’re paying for.”
Moreno responded that rather than passing on government-imposed costs, home builders could simply eat them.
“You could also reduce your profit margin, too,” said Moreno. “You don’t have to automatically pass it on to the consumer. That’s a choice by you, as well.”
That is a classic progressive-Left view of profit: it’s simply money left over after covering costs that is pocketed by greedy corporations rather than used to fund the Left’s policy priorities. They view profit like Scrooge McDuck’s vault – an enormous reposiory of surplus cash, piling up for the gratification of the rich.
Does Moreno know what the profit margin of the Shopoff project – or development projects in general – even is? For a guy who routinely lectures about not making policy decisions without data, isn’t suggesting developers simply take Anaheim’s proposed development fees out of their “profits” ill-informed?
When the cost of building materials, labor, land, financing and other cost factors increase, should developers also take those out of their profits rather than recouping their costs through the pricing structure?
Moreno supports inclusionary housing (forcing builders to include a percentage of very-low income units in their projects); wants to pursue rent stabilization; and clearly supports higher development fees to “mitigate” impacts (as if more housing is a bad thing).
Under inclusionary housing policies force developers to build and sell low-income properties at a loss, which they have to make up by jacking up housing prices for everyone else. Is that fair to families who have to pay higher prices inflated by government fiat?
Rent stabilization and rent control policies benefit those who already have an apartment. However, such policies are disincentives to building new apartment projects. The also depress vacancy rates because tenants living in rent-controlled apartments are unlikely to move. The net result is a decrease in the affordable housing stock. As usual, progressive policies wind up hurting those they intend to help: those on the lower end of the socioeconomic spectrum.
Development fee increases like those being contemplated by Anaheim will have negative impacts, as well. Every elected official in the county declares the need to build more housing of all kinds. How will that happen in Anaheim if the city adopts fees that make it more expensive to build and sell housing? The more affluent will still be able to buy a home – it’s everyone else who gets locked out.
Moreno’s “you could reduce your profit margin” comment is emblematic of the left-wing world view. Progressives impose their expensive policy priorities on those they decide have “enough” money and can therefore “afford” it. Their impatience with the market can morph into attempts to dictate the type and number of products it creates – in this case, affordable housing.
Moreno has publicly stated his belief that developers will not build low-income housing unless government makes them do it. And he’s OK with doing that. There’s a lack of curiosity about the factors driving housing prices in California. Thanks to web of government policies woven during the past few decades, developing homes takes much longer and costs much more money than necessary – certainly more so than in other parts of the country. As Adam Wood told Moreno, government fees and regulations account for fully one-third of the cost of a home. That’s a huge chunk. Moreno’s response wasn’t that we need to re-examine and reform the policies driving up housing costs – it was telling the developer to suck it and “make less money.”
What other response should we really expect? This is of a piece with his support for the SB 1 gas tax. Instead of re-ordering the spending priorities of a state government enjoying record-high revenues, progressives like Moreno would rather Californians spend a higher percentage of their family budget on gas. That, of course, hurts those who have the least – the poor and working families whom leftists like Moreno purport to champion.