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San Diego Daily Transcript

October 15, 2009

October 13, 2009

Reduced impact fees will help housing market recover, developers say

By MONICA UNHOLD, The Daily Transcript

In order to experience a recovery, San Diego’s building industry needs development fees reduced, industry members told attendees of the Urban Land Institute San Diego/Tijuana chapter’s Tuesday meeting titled, “Real Estate Development Stimulus: The Recovery Package for Builders.”

In July, San Diego City Council voted to defer developer impact fees. Previously, developers were required to pay impact fees before construction began on a new project. Fees will now be due before a new building can be sold or leased. The impact fees addressed by the measure average $30,000 per new dwelling unit.

The measure helped developers get back to work, however reducing impact fees further would stimulate the economy, said Borre Winckel, chief executive officer of the Building Industry Association San Diego chapter.

“I would like to see impact fees cut in half,” Winckel said. “I think that’s where the true stimulus will come from.”

Impact fees are increased when the market is good but there is never “a parallel reduction” in a recession, Winckel said. City governments in other parts of the state have already reduced impact fees, but San Diego is resistant.

“We’re still making these arguments at the city hall level, where they (fee reductions) are largely in place elsewhere,” Winckel said.

The cost-benefit ratio of such ordinances is beneficial for both developers and municipalities, Winckel said. The benefit for the industry is only $60 to $80 per permit per $1,000 in permit fees deferred, however the BIA expects the measure will increase permitting activity and thus city revenue.

In addition to being costly, the permitting process is also slow, said Paul Barnes, president of Shea Homes. The city needs more development services employees, a problem that would best be solved by establishing public-private partnerships.

The building industry is also burdened by an increase in litigation, said John Ponder, an attorney with Sheppard Mullin. The cost of litigation aside, developers must get approval from city council to have their permits extended, which costs as much as $9,000.

Cities need to institute a policy that automatically extends permits on projects delayed due to litigation, Ponder said.

Many groups use environmental challenges to oppose projects. The California Environmental Quality Act (CEQA) is being used increasingly to oppose new development, Ponder said.

“When a soccer mom knows CEQA well enough to use it to stop a neighbor’s project, it’s out of control,” Winckel said. “We need reform.”