The Mitigation Fee Act regulates fees for development projects, fees for specific purposes, including water and sewer connection fees, and fees for solar energy systems, among others. The act, among other things, requires local agencies to comply with various conditions when imposing fees, extractions, or charges as a condition of approval of a proposed development or development project.

The act prohibits a local agency that imposes fees or charges on a residential development for the construction of public improvements or facilities from requiring the payment of those fees or charges until the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first, except for utility service fees, which the local agency is authorized to collect at the time an application for utility service is received. The act exempts specified units in a residential development proposed by a nonprofit housing developer if the housing development meets certain conditions.

This bill would limit the utility service fees exception described above to utility service fees related to connections, and cap those fees at the costs incurred by the utility provider resulting from the connection activities. The bill would extend the above-described exemption for those units in a residential development that meets those conditions to any housing developer.

The act authorizes a local agency to require the payment sooner than the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first, if specified conditions are met, including if the fees or charges are to reimburse the local agency for expenditures previously made.

This bill would, for designated residential development projects, as defined, prohibit a local agency from requiring payment of fees or charges on the residential development for the construction of public improvements or facilities until the date the first certificate of occupancy or first temporary certificate of occupancy is issued, as specified. The bill would authorize the local agency to require the payment of those fees or charges at an earlier time if certain conditions are met, except as specified. For specified units, the bill would authorize a developer to guarantee payment of certain fees or charges by posting a performance bond or a letter of credit from a federally insured, recognized depository institution. If the developer does not post a performance bond or a letter of credit, the bill would authorize the city, county, or city and county to collect certain fees or charges in accordance with a specified procedure.

If any fee or charge described above is not fully paid prior to issuance of a building permit, the act authorizes the local agency issuing the building permit to require the property owner to execute a contract to pay the fee or charge as a condition of issuance of the building permit, as specified.

This bill would authorize the governing body of a local agency to authorize an officer or employee of the local agency to approve and execute contracts described above, and would require the local agency to post a model form of contract on its internet website, if it maintains an internet website, before requiring execution of a contract under the provisions described above.

The Mitigation Fee Act regulates fees for development projects, fees for specific purposes, including water and sewer connection fees, and fees for solar energy systems, among others. The act, among other things, requires local agencies to comply with various conditions when imposing fees, extractions, or charges as a condition of approval of a proposed development or development project.

The act prohibits a local agency that imposes fees or charges on a residential development for the construction of public improvements or facilities from requiring the payment of those fees or charges until the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first, except for utility service fees, which the local agency is authorized to collect at the time an application for utility service is received. The act exempts specified units in a residential development proposed by a nonprofit housing developer if the housing development meets certain conditions.

This bill would limit the utility service fees exception described above to utility service fees related to connections, and cap those fees at the costs incurred by the utility provider resulting from the connection activities. The bill would extend the above-described exemption for those units in a residential development that meets those conditions to any housing developer.

The act authorizes a local agency to require the payment sooner than the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first, if specified conditions are met, including if the fees or charges are to reimburse the local agency for expenditures previously made.

This bill would, for designated residential development projects, as defined, prohibit a local agency from requiring payment of fees or charges on the residential development for the construction of public improvements or facilities until the date the first certificate of occupancy or first temporary certificate of occupancy is issued, as specified. The bill would authorize the local agency to require the payment of those fees or charges at an earlier time if certain conditions are met, except as specified. For specified units, the bill would authorize a developer to guarantee payment of certain fees or charges by posting a performance bond or a letter of credit from a federally insured, recognized depository institution. If the developer does not post a performance bond or a letter of credit, the bill would authorize the city, county, or city and county to collect certain fees or charges in accordance with a specified procedure.

If any fee or charge described above is not fully paid prior to issuance of a building permit, the act authorizes the local agency issuing the building permit to require the property owner to execute a contract to pay the fee or charge as a condition of issuance of the building permit, as specified.

This bill would authorize the governing body of a local agency to authorize an officer or employee of the local agency to approve and execute contracts described above, and would require the local agency to post a model form of contract on its internet website, if it maintains an internet website, before requiring execution of a contract under the provisions described above.

The Mitigation Fee Act regulates fees for development projects, fees for specific purposes, including water and sewer connection fees, and fees for solar energy systems, among others. The act, among other things, requires local agencies to comply with various conditions when imposing fees, extractions, or charges as a condition of approval of a proposed development or development project.

The act prohibits a local agency that imposes fees or charges on a residential development for the construction of public improvements or facilities from requiring the payment of those fees or charges until the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first, except for utility service fees, which the local agency is authorized to collect at the time an application for utility service is received. The act exempts specified units in a residential development proposed by a nonprofit housing developer if the housing development meets certain conditions.

This bill would limit the utility service fees exception described above to utility service fees related to connections, and cap those fees at the costs incurred by the utility provider resulting from the connection activities. The bill would extend the above-described exemption for those units in a residential development that meets those conditions to any housing developer.

The act authorizes a local agency to require the payment sooner than the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first, if specified conditions are met, including if the fees or charges are to reimburse the local agency for expenditures previously made.

This bill would, for designated residential development projects, as defined, prohibit a local agency from requiring payment of fees or charges on the residential development for the construction of public improvements or facilities until the date the first certificate of occupancy or first temporary certificate of occupancy is issued, as specified. The bill would authorize the local agency to require the payment of those fees or charges at an earlier time if certain conditions are met, except as specified. For specified units, the bill would authorize a developer to guarantee payment of certain fees or charges by posting a performance bond or a letter of credit from a federally insured, recognized depository institution. If the developer does not post a performance bond or a letter of credit, the bill would authorize the city, county, or city and county to collect certain fees or charges in accordance with a specified procedure.

If any fee or charge described above is not fully paid prior to issuance of a building permit, the act authorizes the local agency issuing the building permit to require the property owner to execute a contract to pay the fee or charge as a condition of issuance of the building permit, as specified.

This bill would authorize the governing body of a local agency to authorize an officer or employee of the local agency to approve and execute contracts described above, and would require the local agency to post a model form of contract on its internet website, if it maintains an internet website, before requiring execution of a contract under the provisions described above.

The Planning and Zoning Law requires each county and each city to adopt a comprehensive, long-term general plan for its physical development, and the development of specified land outside its boundaries, that includes, among other mandatory elements, a housing element. Existing law, the Permit Streamlining Act, among other things, requires a public agency that is the lead agency for a development project to approve or disapprove that project within specified time periods. Existing law extended by 18 months the period for the expiration, effectuation, or utilization of a housing entitlement, as defined, that was issued before, and was in effect on, March 4, 2020, and that would expire before December 31, 2021, except as specified. Existing law provides that if the state or a local agency extended the otherwise applicable time for the expiration, effectuation, or utilization of a housing entitlement for not less than 18 months, as specified, that housing entitlement would not be extended an additional 18 months pursuant to these provisions.

This bill would extend by 24 months the period for the expiration, effectuation, or utilization of a housing entitlement for a priority designated residential development project, as those terms are defined, that was issued before January 1, 2024, and that will expire before December 31, 2025, except as specified. The bill would toll this 24-month extension during any time that the housing entitlement is the subject of a legal challenge. By adding to the duties of local officials with respect to housing entitlements, this bill would impose a state-mandated local program. The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.

The Mitigation Fee Act regulates fees for development projects, fees for specific purposes, including water and sewer connection fees, and fees for solar energy systems, among others. The act, among other things, requires local agencies to comply with various conditions when imposing fees, extractions, or charges as a condition of approval of a proposed development or development project.

The act prohibits a local agency that imposes fees or charges on a residential development for the construction of public improvements or facilities from requiring the payment of those fees or charges until the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first, except for utility service fees, which the local agency is authorized to collect at the time an application for utility service is received.

This bill would limit the utility service fees exception described above to utility service fees related to connections, and cap those fees at the costs incurred by the utility provider resulting from the connection activities.

The act authorizes a local agency to require the payment sooner than the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first, if specified conditions are met, including if the fees or charges are to reimburse the local agency for expenditures previously made.

This bill would, for priority designated residential development projects, as defined, prohibit a local agency from requiring payment of fees or charges on the residential development for the construction of public improvements or facilities until the date the first certificate of occupancy or first temporary certificate of occupancy is issued, as specified. The bill would authorize the local agency to require the payment of those fees or charges at an earlier time if certain conditions are met, except as specified.

If any fee or charge described above is not fully paid prior to issuance of a building permit, the act authorizes the local agency issuing the building permit to require the property owner to execute a contract to pay the fee or charge as a condition of issuance of the building permit, as specified.

This bill would authorize the governing body of a local agency to authorize an officer or employee of the local agency to approve and execute contracts described above, and would require the local agency to post a model form of contract on its internet website, if it maintains an internet website, before requiring execution of a contract under the provisions described above.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The Planning and Zoning Law requires each county and each city to adopt a comprehensive, long-term general plan for its physical development, and the development of specified land outside its boundaries, that includes, among other mandatory elements, a housing element. Existing law, the Permit Streamlining Act, among other things, requires a public agency that is the lead agency for a development project to approve or disapprove that project within specified time periods. Existing law extended by 18 months the period for the expiration, effectuation, or utilization of a housing entitlement, as defined, that was issued before, and was in effect on, March 4, 2020, and that would expire before December 31, 2021, except as specified. Existing law provides that if the state or a local agency extended the otherwise applicable time for the expiration, effectuation, or utilization of a housing entitlement for not less than 18 months, as specified, that housing entitlement would not be extended an additional 18 months pursuant to these provisions.

This bill would extend by 24 months the period for the expiration, effectuation, or utilization of a housing entitlement for a priority residential development project, as those terms are defined, that was issued before January 1, 2024, and that will expire before December 31, 2025, except as specified. The bill would toll this 24-month extension during any time that the housing entitlement is the subject of a legal challenge. By adding to the duties of local officials with respect to housing entitlements, this bill would impose a state-mandated local program. The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.

The Mitigation Fee Act regulates fees for development projects, fees for specific purposes, including water and sewer connection fees, and fees for solar energy systems, among others. The act, among other things, requires local agencies to comply with various conditions when imposing fees, extractions, or charges as a condition of approval of a proposed development or development project.

The act prohibits a local agency that imposes fees or charges on a residential development for the construction of public improvements or facilities from requiring the payment of those fees or charges until the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first, except for utility service fees, which the local agency is authorized to collect at the time an application for utility service is received.

This bill would limit the utility service fees exception described above to utility service fees related to connections, and cap those fees at the costs incurred by the utility provider resulting from the connection activities.

The act authorizes a local agency to require the payment sooner than the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first, if specified conditions are met, including if the fees or charges are to reimburse the local agency for expenditures previously made.

This bill would, for priority residential development projects, as defined, prohibit a local agency form from requiring payment of fees or charges on the residential development for the construction of public improvements or facilities until the date the certificate of occupancy is issued, as specified. The bill would authorize the local agency to require the payment of those fees or charges at an earlier time if certain conditions are met, except as specified.

If any fee or charge described above is not fully paid prior to issuance of a building permit, the act authorizes the local agency issuing the building permit to require the property owner to execute a contract to pay the fee or charge as a condition of issuance of the building permit, as specified.

This bill would authorize the governing body of a local agency to authorize an officer or employee of the local agency to approve and execute contracts described above, and would require the local agency to post a model form of contract on its internet website prior to website, if it maintains an internet website, before requiring execution of a contract under the provisions described above.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The Planning and Zoning Law requires each county and each city to adopt a comprehensive, long-term general plan for its physical development, and the development of specified land outside its boundaries, that includes, among other mandatory elements, a housing element. Existing law, the Permit Streamlining Act, among other things, requires a public agency that is the lead agency for a development project to approve or disapprove that project within specified time periods. Existing law extended by 18 months the period for the expiration, effectuation, or utilization of a housing entitlement, as defined, that was issued before, and was in effect on, March 4, 2020, and that would expire before December 31, 2021, except as specified. Existing law provides that if the state or a local agency extended the otherwise applicable time for the expiration, effectuation, or utilization of a housing entitlement for not less than 18 months, as specified, that housing entitlement would not be extended an additional 18 months pursuant to these provisions.

This bill would extend by 24 months the period for the expiration, effectuation, or utilization of a housing entitlement, entitlement for a priority residential development project, as those terms are defined, that was issued before January 1, 2024, and that will expire before December 31, 2025, except as specified. The bill would toll this 24-month extension during any time that the housing entitlement is the subject of a legal challenge. By adding to the duties of local officials with respect to housing entitlements, this bill would impose a state-mandated local program. The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.

The Mitigation Fee Act regulates fees for development projects, fees for specific purposes, including water and sewer connection fees, and fees for solar energy systems, among others. The act, among other things, requires local agencies to comply with various conditions when imposing fees, extractions, or charges as a condition of approval of a proposed development or development project.

The act prohibits a local agency that imposes fees or charges on a residential development for the construction of public improvements or facilities from requiring the payment of those fees or charges until the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first. The first, except for utility service fees, which the local agency is authorized to collect at the time an application for utility service is received.

The act authorizes a local agency to require the payment sooner than the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first, if specified conditions are met, including if the fees or charges are to reimburse the local agency for expenditures previously made. The act exempts units reserved for occupancy by lower income households included in a residential development proposed by a nonprofit housing developer, as specified, from the authorization to require an earlier payment, but authorizes a city or county to require for those exempt units the posting of a performance bond or a letter of credit from a federally insured, recognized depository institution to guarantee payment of any fees or charges. The act, if a fee or charge is not fully paid prior to issuance of a building permit for construction, authorizes the local agency to require the property owner to execute a contract to pay the fee or charge, as specified.

This bill would instead prohibit a local agency from requiring the payment of those fees or charges until the date the certificate of occupancy is issued, and would prohibit the local agency from charging interest or other fees on any amount deferred. The bill would remove the authorization for a local agency to require the payment sooner if the fees or charges are to reimburse the local agency for expenditures previously made. The bill would revise the exemption from earlier payment for units reserved for occupancy by lower income households by a nonprofit housing developer to be those by an affordable housing developer, as specified, and would repeal the authorization for a city or county to require the posting of a performance bond or a letter of credit for those exempt units. The bill would repeal the authorization of the local agency to require the property owner to execute a contract to pay the fee or charge, and would instead authorize the local agency to withhold the certificate of occupancy until the fees and charges are paid. would, for priority residential development projects, as defined, prohibit a local agency form requiring payment of fees or charges on the residential development for the construction of public improvements or facilities until the date the certificate of occupancy is issued, as specified. The bill would authorize the local agency to require the payment of those fees or charges at an earlier time if certain conditions are met, except as specified.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The Planning and Zoning Law requires each county and each city to adopt a comprehensive, long-term general plan for its physical development, and the development of specified land outside its boundaries, that includes, among other mandatory elements, a housing element. Existing law, the Permit Streamlining Act, among other things, requires a public agency that is the lead agency for a development project to approve or disapprove that project within specified time periods. Existing law extended by 18 months the period for the expiration, effectuation, or utilization of a housing entitlement, as defined, that was issued before, and was in effect on, March 4, 2020, and that would expire before December 31, 2021, except as specified. Existing law provides that if the state or a local agency extended the otherwise applicable time for the expiration, effectuation, or utilization of a housing entitlement for not less than 18 months, as specified, that housing entitlement would not be extended an additional 18 months pursuant to these provisions.

This bill would extend by 18 24 months the period for the expiration, effectuation, or utilization of a housing entitlement, as defined, that was issued before January 1, 2024, and that will expire before December 31, 2025, except as specified. The bill would toll this 18-month 24-month extension during any time that the housing entitlement is the subject of a legal challenge. By adding to the duties of local officials with respect to housing entitlements, this bill would impose a state-mandated local program. The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.

The Mitigation Fee Act regulates fees for development projects, fees for specific purposes, including water and sewer connection fees, and fees for solar energy systems, among others. The act, among other things, requires local agencies, as defined, agencies to comply with various conditions when imposing fees, extractions, or charges as a condition of approval of a proposed development or development project. The act defines fee to mean a monetary exaction other than a tax or special assessment that is charged by a local agency to the applicant in connection with approval of a development project for the purpose of defraying all or a portion of the cost of public facilities related to the development project. The act exempts certain fees from this definition, including a fee paid or land dedicated for park or recreational purposes as a condition to the approval of a tentative map or parcel map, as specified.

The act prohibits a local agency that imposes fees or charges on a residential development for the construction of public improvements or facilities from requiring the payment of those fees or charges until the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first. The act authorizes a local agency to require the payment sooner if specified conditions are met, including if the fees or charges are to reimburse the local agency for expenditures previously made. The act exempts units reserved for occupancy by lower income households included in a residential development proposed by a nonprofit housing developer, as specified, from the authorization to require an earlier payment, but authorizes a city or county to require for those exempt units the posting of a performance bond or a letter of credit from a federally insured, recognized depository institution to guarantee payment of any fees or charges. The act, if a fee or charge is not fully paid prior to issuance of a building permit for construction, authorizes the local agency to require the property owner to execute a contract to pay the fee or charge, as specified.

This bill would instead prohibit a local agency from requiring the payment of those fees or charges until the date the certificate of occupancy is issued, and would prohibit the local agency from charging interest or other fees on any amount deferred. The bill would remove the authorization for a local agency to require the payment sooner if the fees or charges are to reimburse the local agency for expenditures previously made. The bill would revise the exemption from earlier payment for units reserved for occupancy by lower income households by a nonprofit housing developer to be those by an affordable housing developer, as specified, and would repeal the authorization for a city or county to require the posting of a performance bond or a letter of credit for those exempt units. The bill would repeal the authorization of the local agency to require the property owner to execute a contract to pay the fee or charge, and would instead authorize the local agency to withhold the certificate of occupancy until the fees and charges are paid.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The Planning and Zoning Law requires each county and each city to adopt a comprehensive, long-term general plan for its physical development, and the development of specified land outside its boundaries, that includes, among other mandatory elements, a housing element. Existing law, the Permit Streamlining Act, among other things, requires a public agency that is the lead agency for a development project to approve or disapprove that project within specified time periods. Existing law extended by 18 months the period for the expiration, effectuation, or utilization of a housing entitlement, as defined, that was issued before, and was in effect on, March 4, 2020, and that would expire before December 31, 2021, except as specified. Existing law provides that if the state or a local agency extended the otherwise applicable time for the expiration, effectuation, or utilization of a housing entitlement for not less than 18 months, as specified, that housing entitlement would not be extended an additional 18 months pursuant to these provisions.

This bill would extend by 18 months the period for the expiration, effectuation, or utilization of a housing entitlement, as defined, that was issued before January 1, 2024, and that will expire before December 31, 2025, except as specified. The bill would toll this 18-month extension during any time that the housing entitlement is the subject of a legal challenge. By adding to the duties of local officials with respect to housing entitlements, this bill would impose a state-mandated local program.The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.

The Mitigation Fee Act regulates fees for development projects, fees for specific purposes, including water and sewer connection fees, and fees for solar energy systems, among others. The act, among other things, requires local agencies, as defined, to comply with various conditions when imposing fees, extractions, or charges as a condition of approval of a proposed development or development project. The act defines fee to mean a monetary exaction other than a tax or special assessment that is charged by a local agency to the applicant in connection with approval of a development project for the purpose of defraying all or a portion of the cost of public facilities related to the development project. The act exempts certain fees from this definition, including a fee paid or land dedicated for park or recreational purposes as a condition to the approval of a tentative map or parcel map, as specified.

This bill would remove that exception. The bill would specify that water districts and sanitation districts are included in the definition of a local agency for purposes of the act.

The act prohibits a local agency that imposes fees or charges on a residential development for the construction of public improvements or facilities from requiring the payment of those fees or charges until the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first. The act authorizes a local agency to require the payment sooner if specified conditions are met, including if the fees or charges are to reimburse the local agency for expenditures previously made. The act exempts units reserved for occupancy by lower income households included in a residential development proposed by a nonprofit housing developer, as specified, from the authorization to require an earlier payment, but authorizes a city or county to require for those exempt units the posting of a performance bond or a letter of credit from a federally insured, recognized depository institution to guarantee payment of any fees or charges. The act, if a fee or charge is not fully paid prior to issuance of a building permit for construction, authorizes the local agency to require the property owner to execute a contract to pay the fee or charge, as specified.

This bill would instead prohibit a local agency from requiring the payment of those fees or charges until the date the certificate of occupancy is issued, and would prohibit the local agency from charging interest or other fees on any amount deferred. The bill would remove the authorization for a local agency to require the payment sooner if the fees or charges are to reimburse the local agency for expenditures previously made. The bill would revise the exemption from earlier payment for units reserved for occupancy by lower income households by a nonprofit housing developer to be those by an affordable housing developer, as specified, and would repeal the authorization for a city or county to require the posting of a performance bond or a letter of credit for those exempt units. The bill would repeal the authorization of the local agency to require the property owner to execute a contract to pay the fee or charge, and would instead authorize the local agency to withhold the certificate of occupancy until the fees and charges are paid.

Existing law prohibits a local agency from imposing fees for water connections or sewer connections, or capacity charges, that exceed the estimated reasonable cost of providing the service, and specifies that those fees or charges are not subject to the specified provisions of the act applicable to development projects, including requiring local agencies to comply with certain requirements when imposing fees, extractions, or charges as a condition of approval of a proposed development or development project.

This bill would provide that those fees or charges are subject to specified provisions of the act. By requiring local agencies to comply with specified requirements when imposing fees, extractions, or charges as a condition of approval of a proposed development or development project, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

 UNFINISHED BUSINESS  

Bill No: SB 937

Author: Wiener (D), et al.

Amended: 8/22/24

Vote: 21

SENATE LOCAL GOVERNMENT COMMITTEE: 6-0, 4/3/24

AYES: Durazo, Seyarto, Dahle, Skinner, Wahab, Wiener

NO VOTE RECORDED: Glazer

SENATE HOUSING COMMITTEE: 9-0, 4/16/24

AYES: Skinner, Blakespear, Caballero, Cortese, Menjivar, Padilla, Seyarto, Umberg, Wahab

NO VOTE RECORDED: Ochoa Bogh

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SENATE FLOOR: 36-0, 5/20/24

AYES: Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Newman, Niello, Ochoa Bogh, Padilla, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

NO VOTE RECORDED: Allen, Min, Nguyen, Portantino

ASSEMBLY FLOOR: 63-1, 8/27/24 - See last page for vote

SUBJECT: Development projects: fees and charges

SOURCE: California YIMBY

Housing Action Coalition

DIGEST:

This bill makes various changes to the process for local agencies to collect development impact fees.

Assembly Amendments

limit the types of impact fees for which a local agency can collect earlier than certificate of occupancy, specify the process for local agencies to guarantee collection of funds, require a developer to begin construction within five years if fees are deferred, and remove entitlement extension provisions.

ANALYSIS:

Existing law:

1. Allows local governments to require applicants for development projects to pay fees to mitigate the project’s effects, known as mitigation or development impact fees.
2. Requires, under the Mitigation Fee Act, local officials that are establishing, increasing, or imposing a fee as a condition of approving a development project to:
   1. Identify the fee's purpose.
   2. Identify the fee's use, including the public facilities to be financed.
   3. Determine a reasonable relationship between the fee's use and the development.
   4. Determine a reasonable relationship between the public facility's need and the development.
   5. Determine a reasonable relationship between the fee's amount and the cost of the public facility.
   6. Hold at least one open and public meeting prior to levying a new fee or increasing an existing one.
   7. If they decide to adopt capital improvement plans, indicate the approximate location, size, time of availability, and estimates of cost for all facilities or improvements to be financed with the fees.
   8. Deposit and spend the fees within five years of collecting them.
   9. Refund fees or make specific findings on when and how the fees will be spent for construction, if the fees aren’t spent within five years of collection.
3. Requires local agencies to deposit mitigation fees to fund a capital improvement associated with a development in a separate account or fund.
4. Requires local agencies that impose mitigation fees to produce an annual report within 180 days of the end of the fiscal year that includes specified information.
5. Requires a city, county, or special district that has an internet website to post and update on their websites specified information, including a current schedule of housing development project costs, zoning ordinances and development standards, annual impact fee reports, and an archive of specified impact fee nexus studies.
6. Requires local agencies to conduct and adopt a nexus study prior to the adoption of an impact fee, and specified standards and practices.
7. Provides that cities and counties cannot collect impact fees before they conduct the final inspection or issue a certificate of occupancy, whichever occurs first. However, utilities can collect impact fees at the time the utility receives an application for service, which can happen before a final inspection.
8. Allows the local agency, for residential developments with more than one dwelling, to determine whether developers pay fees on a pro rata or on a lump sum basis when the first dwelling in the development receives its final inspection or certificate of occupancy, whichever occurs first.
9. Allows local agencies to require payment earlier than described above if it has adopted a proposed construction schedule or to reimburse the local agency for expenditures already made, so long as the project does not come from a nonprofit developer that reserves at least 49% of units for lower income households. Cities and counties can require performance bonds or letters of credits to guarantee these specific payments.
10. Provides that if the developer has not fully paid the impact fees before the local agency has issued a building permit for construction of any portion of the residential development, the local agency can require the developer, as a condition of receiving the building permit, to enter into a contract to pay the fees, secured by a lien on the property.
11. Allows the local agency to require the developer to provide notification of the opening of any escrow for the sale of the property, and disclose in the escrow instructions that the fees must be paid before disbursing proceeds to the seller. The local agency can defer collection of one or more fees up to the close of escrow.

This bill:

1. Provides, for designated residential development projects, that if a local agency imposes any fees or charges on the housing development for the construction of public improvements or facilities, then all of the following conditions apply:
   1. Prohibits the local agency from requiring the payment of those fees or charges until the date the first certificate of occupancy or temporary certificate of occupancy is issued, whichever occurs first. However, this does not apply if construction on the residential development does not begin within five years of the date the local agency issues the building permit.
   2. Requires the amount of fees and charges to be the same amount as would have been paid had they been paid prior to the issuance of building permits. Prohibits the local agency from charging interest or other fees on any deferred amount.
   3. Provides that if the housing development includes more than one dwelling, the local agency may determine whether fees and charges shall be paid:
      1. On a pro rata basis for each dwelling when it receives its certificate of occupancy;
      2. On a pro rata basis when a certain percentage of the dwellings have received their certificate of occupancy; or
      3. On a lump sum basis when all the dwellings in the development receive their certificate of occupancy.
2. Limits when local agencies can collect fees earlier than final inspection or certificate of occupancy for designated housing development projects:
   1. Instead of any fees or charges to reimburse the local agency for expenditures previously made, they can only collect earlier for those expenditures previously made provided the local agency has not been paid or reimbursed by another party.
   2. The local agency can collect earlier if they determine both of the following:
      1. The fees or charges are for:
         1. Public improvements related to providing water, sewer, wastewater, fire, public safety, or emergency services to the residential development.
         2. Roads, sidewalks, or other public improvements or facilities for the transportation of people that serve the development, including the acquisition of all property, easements, and rights-of-way that may be required to carry out the improvements or facilities.
         3. Construction and rehabilitation of school facilities, if a school district has a five-year plan as specified.
      2. An account has been established and funds appropriated for the public improvements or facilities.
3. Modifies the ability for a local agency to require a developer to post a performance bond or letter of credit for specified affordable housing projects. If the developer does not post a performance bond or letter of credit, then the city or county can collect fees by making them a lien upon the land for which the fees are unpaid and subject them to the same collection process as ad valorem property taxes.
4. Allows a local agency to withhold a certificate of occupancy or temporary certificate of occupancy until the local agency receives payment of fees or charges.
5. Provides that if the local agency does not issue certificates of occupancy for these types of housing developments, the final inspection shall serve as the certificate of occupancy.
6. Provides that utility service fees related to connections may be collected at the time an application for service is received, provided those fees do not exceed the costs incurred by the utility provider resulting from the connection activities.
7. Provides that when a local agency requires a property owner or lessee to execute a contract to pay any outstanding fees or charges as a condition of issuing the building permit, the local agency may authorize an officer or employee of the local agency to approve and execute contracts on its behalf. Requires a local agency, prior to execution of a contract, to post a model form of the contract on its website.
8. Defines “designated residential development project” as specified streamlined and affordable housing projects, as well as all projects ten units or less.
9. Modifies the exemption for affordable housing projects from the ability for local agencies to collect impact fees earlier than final inspection or certificate of occupancy to apply to any housing developer, not just a nonprofit housing developer.

Background

Local governments can charge a variety of fees to a development. These fees, commonly known as impact fees or mitigation fees, go toward infrastructure development (such as adding lanes to roads or supporting additional traffic) or other public benefits (such as new parks, schools, or affordable housing). In response to the reduction in property tax revenues from Proposition 13 and the difficulty of raising taxes, local agencies have turned to other sources of funds for general operations, including sales taxes and transient occupancy taxes, also known as hotel taxes. Commercial enterprises generate sales tax and hotel tax revenue, and simultaneously pay property taxes and demand relatively few services (such as public safety or parks). Residential developments, by contrast, do not directly generate sales or hotel tax revenue, and the new residents demand a wider variety of more intensive services. As a result, cities and counties face a disincentive to approve housing because of the higher net fiscal cost of residential development, particularly if they have the option to instead permit commercial development that may produce net fiscal benefits, also known as the fiscalization of land use.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 8/27/24)

California YIMBY (co-source)
Housing Action Coalition (co-source)
21st Century Alliance
American Council of Engineering Companies of California
Apartment Association of Greater Los Angeles
Bay Area Council
Cal Chamber
Calchamber
California Apartment Association
California Building Industry Association
California Building Industry Association
California Community Builders
California Hispanic Chambers of Commerce
California Housing Consortium
California Rental Housing Association
Central City Association
Central City Association of Los Angeles
City of Gilroy Council Member Zach Hilton
Dignitymoves
East Bay for Everyone
East Bay YIMBY
Eastside Housing for All
Fieldstead and Company, INC.
Fremont for Everyone
Generation Housing
Grow the Richmond
Habitat for Humanity California
Habitat for Humanity Greater San Francisco
House Sacramento
Housing Leadership Council of San Mateo County
Housing Trust Silicon Valley
How to Adu
Leadingage California
Livable Communities Initiative
Midpen Housing
Mountain View YIMBY
Napa-Solano for Everyone
Northern Neighbors
Peninsula for Everyone
People for Housing - Orange County
People for Housing Orange County
Progress Noe Valley
Rand Paster Nelson
San Francisco Bay Area Planning and Urban Research Association
San Francisco YIMBY
San Luis Obispo YIMBY
Santa Cruz YIMBY
Santa Rosa YIMBY
Silicon Valley Leadership Group
South Bay YIMBY
Southside Forward
Spur
Streets for People
United Way of Greater Los Angeles
Urban Environmentalists
Valley Industry and Commerce Association
Ventura County YIMBY
YIMBY Action
YIMBY SLO

OPPOSITION: (Verified 8/27/24)

Association of California School Administrators
California Association of Recreation & Park Districts
California Association of Sanitation Agencies
California Association of School Business Officials
California Coalition for Adequate School Housing
California Municipal Utilities Association
California School Boards Association
California Special Districts Association
California State Association of Counties
Cities Association of Santa Clara County
City of Belmont
City of La Verne
City of Rancho Cucamonga
City of Rolling Hills Estates
City of San Marcos
City of Thousand Oaks
Concord; City of
Desert Water Agency
East Bay Housing Organizations
El Dorado Irrigation District
Kern County Superintendent of Schools
Kern County Superintendent of Schools Office
League of California Cities
Los Angeles Unified School District
Small School Districts Association
South Bay Cities Council of Governments
Urban Counties of California

ARGUMENTS IN SUPPORT: According to the author, “Senate Bill 937 seeks to minimize the impact of market fluctuations and high interest rates on housing production by delaying development fees and providing additional time post-entitlement. Many cities have deferred the collection of development fees during periods of economic hardship to prevent housing production from halting. Additionally, economic volatility can cause some projects to die because their entitlements expire before the developer can raise the money to complete the project. Cities grant entitlements to developers as the last step before construction begins, but they are typically only valid for a limited period before expiring. With today’s high interest rates and rising costs driven by COVID-related inflation, developers are facing a challenge to make projects pencil. SB 937 helps address these concerns by delaying the payment of development fees imposed by a local government until the certificate of occupancy is issued. Local governments may not charge interest rates on any deferred fees. Further, SB 937 provides developers with much-needed wiggle room by extending housing entitlements issued prior to Jan. 1, 2024 and set to expire on or before Dec. 31, 2025 by 18 months. These provisions will ensure market conditions do not dampen California’s work towards addressing our housing crisis.”

ARGUMENTS IN OPPOSITION: According to the California Association of Recreation and Park Districts, the California Special Districts Association, and League of California Cities, “SB 937 restricts the timely funding of vital infrastructure and services necessary to build new homes in livable, equitable, and thriving communities. SB 937 would, among other things, for certain developments, defer development related fees until the certificate of occupancy or its equivalent, while drastically limiting exceptions to this rule. The bill locks in those impact fees prior to the issuance of a building permit and prohibits the charging of interest or indexing for inflation on those deferred fees undermining the buying power of local agencies between the start and completion of the projects, which could be up to 5 years. New amendments create a new exclusive list of exceptions to the rule that omits any other projects like parks, open space among many others. New amendments create a new and conflicting standard for the collection of water and sewer connection and capacity fees, placing them in an inappropriate code section, putting local agencies and their ratepayers at risk of higher rates and liability. One-size-fits all mandates, and financial and legal risk-shifting to local agencies and the communities, taxpayers, and ratepayers they serve, endanger the timely and affordable delivery of essential infrastructure and services that are required to build and maintain housing developments.”

ASSEMBLY FLOOR: 63-1, 8/27/24

Ayes: Addis, Aguiar-Curry, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Megan Dahle, Davies, Flora, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Jackson, Jones-Sawyer, Kalra, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Stephanie Nguyen, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Ramos, Rendon, Reyes, Luz Rivas, Blanca Rubio, Santiago, Soria, Ta, Ting, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

Noes: Muratsuchi

No Vote Recorded: Alanis, Boerner, Cervantes, Dixon, Essayli, Mike Fong, Friedman, Irwin, Lackey, Ortega, Quirk-Silva, Rodriguez, Sanchez, Schiavo, Valencia

Prepared by: Jonathan Peterson / L. GOV. / (916) 651-4119

8/27/24 18:45:34

**** END ****

SENATE THIRD READING

STR Bill Id:SB 937

Author:(Wiener)

As Amended Ver:August 22, 2024

Majority vote

SUMMARY

Prohibits a local government from requiring payment of fees or charges for public improvements or facilities on a designated residential development project before the development receives a certificate of occupancy, except under certain conditions. Authorizes a local government to collect certain unpaid fees or charges in accordance with a specified procedure if the housing developer does not post a performance bond or letter of credit.

Major Provisions

1. Allows any housing developer to use a provision in existing law that prohibits a local agency from collecting fees or charges for public improvements or facilities on residential units affordable to lower income households where at least 49% of units in the residential development are affordable to lower income households.
2. Provides that if a local agency imposes fees or charges on a designated residential development project for the construction of public improvements or facilities, all of the following conditions apply:
   1. Prohibits a local agency from requiring the payment of fees or charges on a designated residential development project until the date the first certificate of occupancy or first temporary certificate of occupancy is issued, whichever occurs first, unless construction of the designated residential development project does not begin within five years of the date the building permit was issued.
      1. Allows a local agency to collect utility service fees related to connections at the time an application for service is received, provided those fees do not exceed the costs incurred by the utility provider resulting from the connection activities.
   2. Prohibits a local agency from charging interest or other fees on any amount of fees or charges that are deferred as a result of the bill and requires that amount of fees and charges to be the same as would have been paid prior to the issuance of building permits.
   3. Allows a local agency to determine whether the fees or charges shall be paid on a pro rata basis for each dwelling when it receives its certificate of occupancy, on a pro rata basis when a certain percentage of the swelling have received their certificates of occupancy, or on a lump-sum basis when all the dwelling in the development receive their certificates of occupancy.
   4. The local agency may withhold a certificate of occupancy or temporary certificate of occupancy until payment of those fees or charges is received.
3. Allows a local agency to collect payment of fees or charges at an earlier time if either of the following conditions are met:
   1. The fees or charges reimburse the local agency for expenditures previously made to the extent those expenditures have not been paid or reimbursed by another party.
   2. The local agency has determined both of the following:
      1. The fees or charges will be collected for any of the following public improvements or facilities:
         1. Public improvements or facilities related to water service to the residential development.
         2. Public improvements or facilities related to sewer or wastewater service to the residential development.
         3. Public improvements or facilities related to fire, public safety, and emergency services to the residential development.
         4. Roads, sidewalks or other public improvements or facilities for the transportation of people that serve the development, including the acquisition of all property, easements, and rights-of-way that may be required to carry out the improvements or facilities.
         5. Construction or rehabilitation of school facilities, if a school district has five year plan, as specified.
      2. An account has been established and funds appropriated for the public improvements or facilities described in i) above.
4. Creates an exception in a local agency's ability to collect fees prior to the certificate of occupancy, as described in 4) above, for residential developments in which at least 49% of the total units are reserved for occupancy by lower income households. However, this exception does not apply to fees and charges levied by school districts, as specified.
   1. Allows a developer to elect to post a performance bond or a letter of credit to guarantee payment of any fees or charges.
   2. Establishes a procedure for a city, county, or city and county to collect any fees or charges that not paid by the first certificate of occupancy if the developer does not post a performance bond or letter of credit. The procedure is as follows:
      1. On or before August 10 of each year, the building official of the local agency shall furnish the county auditor with a description of each parcel for which a performance bond or letter credit has not been posted and fees have not been paid.
      2. The amount of unpaid fees or charges shall constitute a lien upon the land for which the fees or charges are unpaid.
      3. The unpaid fees or charges shall be collected in the same manner and at the same time as county ad valorem taxes.
      4. Establishes that the unpaid fees or charges shall be subject to the same penalties, lien priority, and procedure and sale in case of delinquency that apply to county ad valorem taxes.
      5. Applies all laws applicable to the levy, collection, and enforcement of county ad valorem taxes to the unpaid fees and charges.
   3. Creates an exception to b) above for projects that dedicate 100% of units, exclusive of manager's units or units, to lower income households, and have recorded regulatory agreements with the California Tax Credit Allocation Committee, or the Department of Housing and Community Development.
5. Requires that the final inspection to serve as the certificate of occupancy for local agencies that do not issue certificates of occupancy.
6. Defines a "designated residential development project" as a residential development that meets any of the following conditions:
   1. Dedicates 100% of units, except manager's units, to lower income households, is entitled to a density bonus.
   2. Meets the affordable housing or mixed-income requirements of AB 2011 (Wicks) Chapter 647, Statutes of 2023.
   3. Meets the requirements for streamlined ministerial approval under SB 423 (Wiener) Chapter 778, Statutes of 2023.
   4. Meets the requirements for developments on land owned by institutions of faith or independent institutions of education under SB 4 (Wiener), Chapter 771, Statutes of 2023.
   5. Includes 10 or fewer units.
7. Allows the local agency to authorize an officer or employee of the local agency to approve and execute contracts on its behalf if a local agency requires a property owner or lessee to execute a contract to pay outstanding fees or charges as a condition of issuing the building permit.
8. Requires a local agency, prior to the execution of a contract, to post a model form of the contract on its internet website, as specified.

COMMENTS

1. Mitigation Fee Act. When approving development projects, counties and cities can require the applicants to mitigate the project's effects by paying fees—known as mitigation fees, impact fees, or developer fees. The California courts have upheld impact fees for sidewalks, parks, school construction, and many other public purposes.

When establishing, increasing, or imposing a fee as a condition of approving a development project, the Mitigation Fee Act requires local officials to:

• 1. Identify the fee's purpose.
  2. Identify the fee's use, including the public facilities to be financed.
  3. Determine a reasonable relationship between the fee's use and the development.
  4. Determine a reasonable relationship between the public facility's need and the development.

When imposing a fee as a condition of approving a development project, the Mitigation Fee Act also requires local officials to determine a reasonable relationship between the fee's amount and the cost of the public facility. In its 1987 Nollan decision, the U.S. Supreme Court said there must be an "essential nexus" between a project's impacts and the conditions for approval. In the 1994 Dolan decision, the U.S. Supreme Court said that conditions on development must have a "rough proportionality" to a project's impacts.

In the 1996 Ehrlich decision, the California Supreme Court distinguished between "legislatively enacted" conditions that apply to all projects and "ad hoc" conditions imposed on a project-by- project basis. Ehrlich applied the "essential nexus" test from Nollan and the "rough proportionality" test from Dolan to "ad hoc' conditions. The Court did not apply the Nollan and Dolan tests to the conditions that were "legislatively enacted." In other words, local officials have generally faced greater scrutiny when they impose conditions on a project-by-project basis. As a result of these decisions and the Mitigation Fee Act, local agencies have conducted nexus studies to ensure any proposed impact fees meet these legal tests for most impact fees. Other requirements in the Mitigation Fee Act ensure that impact fees are appropriately levied and spent.

On April 12 of this year, the United States Supreme Court decided Sheetz v. County of El Dorado, California. The case involved the takings clause of the Fifth Amendment to the U.S. Constitution. An El Dorado County resident challenged the county's legislatively enacted traffic impact mitigation fee, arguing the county should only charge him based on the impact associated with his specific parcel. The main question was whether or not the same standards of "essential nexus" and "rough proportionality" apply to legislatively enacted fees as they do to ad-hoc fees.

In the Sheetz decision, the Court stated, "A legislative exception to the Nollan/Dolan test 'conflicts with the rest of our takings jurisprudence,' which does not otherwise distinguish between legislation and other official acts. Knick v. Township of Scott, 588 U. S. 180, 185 (2019)." The Court also proclaimed that, "...as we have explained, a legis­lative exception to the ordinary takings rules finds no sup­port in constitutional text, history, or precedent. We do not address the parties' other disputes over the va­lidity of the traffic impact fee, including whether a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development. The California Court of Appeal did not consider this point—or any of the parties' other nuanced arguments—because it proceeded from the erroneous premise that legislative permit condi­tions are categorically exempt from the requirements of Nollan and Dolan. Whether the parties' other arguments are preserved and how they bear on Sheetz's legal challenge are for the state courts to consider in the first instance."

In addition, Justice Kavanaugh filed a concurring opinion, in which Justices Kagan and Jackson joined saying that, "I join the Court's opinion. I write separately to underscore that the Court has not previously decided—and today explicitly declines to decide—whether 'a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development.' Ante, at 10–11. Importantly, therefore, today's decision does not address or prohibit the common government practice of imposing permit conditions, such as impact fees, on new developments through reasonable formulas or schedules that assess the impact of classes of development rather than the impact of specific parcels of property. Moreover, as is apparent from the fact that today's decision expressly leaves the question open, no prior decision of this Court has addressed or prohibited that longstanding government practice."

1. Impact Fee Collection. Generally, cities and counties cannot collect impact fees before they conduct the final inspection or issue a certificate of occupancy, whichever occurs first. Utilities can collect impact fees at the time the utility receives an application for service, which can happen before a final inspection. For residential developments with more than one dwelling, the local agency can determine whether developers pay fees on a pro rata or on a lump sum basis when the first dwelling in the development receives its final inspection or certificate of occupancy, whichever occurs first.

However, current law allows a local agency to require payment earlier than described above if it has determined that the fees or charges will be collected for public improvement of facilities for which an account has been established. This requirement does not apply to a nonprofit housing developer that reserves at least 49% of units for lower income households. Cities and counties can require performance bonds or letters of credit to guarantee these specific payments.

If the developer has not fully paid the impact fees before the local agency has issued a building permit for construction of any portion of the residential development, the local agency can require the developer, as a condition of receiving the building permit, to enter into a contract to pay the fees, secured by a lien on the property. Additionally, the local agency can require the developer to provide notification of the opening of any escrow for the sale of the property, and disclose in the escrow instructions that the fees must be paid before disbursing proceeds to the seller. The local agency can defer collection of one or more fees up to the close of escrow.

According to the Author

"Senate Bill 937 seeks to minimize the impact of market fluctuations and high interest rates on housing production by delaying development fees and providing additional time post-entitlement. "Many cities have deferred the collection of development fees during periods of economic hardship to prevent housing production from halting. Additionally, economic volatility can cause some projects to die because their entitlements expire before the developer can raise the money to complete the project. Cities grant entitlements to developers as the last step before construction begins, but they are typically only valid for a limited period before expiring. With today's high interest rates and rising costs driven by COVID-related inflation, developers are facing a challenge to make projects pencil. "SB 937 helps address these concerns by delaying the payment of development fees imposed by a local government until the certificate of occupancy is issued. Local governments may not charge interest rates on any deferred fees. Further, SB 937 provides developers with much-needed wiggle room by extending housing entitlements issued prior to Jan. 1, 2024 and set to expire on or before Dec. 31, 2025 by 18 months. These provisions will ensure market conditions do not dampen California's work towards addressing our housing crisis."

Arguments in Support

LeadingAge California wrote in support of the previous version of the bill, "Currently, local governments may apply fees on development projects if the revenue is utilized for necessary services and improvements for their growing population. While development fees are an expected part of construction, they are nonetheless a burden and barrier to new development. SB 937 seeks to strike a balance between the needs of local governments and providing the flexibility developers require to ensure that housing units are built by deferring – not eliminating or decreasing – these fees until the certificate of occupancy. Deferring fees allows projects to pay impact fees after construction rather than before construction. In a high interest rate environment, this change will result in significant savings on financing costs, rendering more projects financially feasible and allowing them to move forward, providing housing, jobs, and tax revenue.

"Housing projects that have gone through the process of getting an entitlement may also be hampered by shifting market conditions. To curb growing inflation, the Federal Reserve has regularly raised interest rates over the past two years. While these increases helped stifle rapidly growing inflation, loans for acquiring properties or funding development projects became too expensive and crippled the viability of many projects already in the pipeline. As interest rates begin to lower, the financing for some projects might again be possible, but in the interim, projects have had their entitlements expire, requiring them to restart the process anew. SB 937 provides temporary relief in these instances, offering an extension of existing entitlements. At a time where the state's investment in affordable housing is uncertain, the Legislature should support solutions that help produce housing while not putting further strain on the state's general fund."

Arguments in Opposition

The California Special Districts Association, California Fire Chiefs Association, and Fire Districts Association of California wrote in opposition to the previous version of the bill, "Development related fees pay for the costs to install infrastructure necessary to build new homes and other developments in livable, equitable, and thriving communities. These fees pay for critical services such as water, sewer, fire protection, parks and open space, flood protection, libraries, and other essential needs. "Specifically, these fees and the infrastructure they fund make new housing and economic development possible. SB 937 would, among other things, for certain developments, defer development impact fees until the certificate of occupancy or its equivalent, locks in those fees at prior to the issuance of a building permit, and prohibit the charging on interest on those deferred fees.

"While we are grateful for Senator Wiener's efforts to dialogue and find compromise, having made several substantive amendments to date, we find that the measure would still benefit from several changes to mitigate the fiscal challenges it presents to local agencies and their efforts to provide essential services and infrastructure."

FISCAL COMMENTS

None.

VOTES

SENATE FLOOR: 36-0-4

YES: Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Newman, Niello, Ochoa Bogh, Padilla, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

ABS, ABST OR NV: Allen, Min, Nguyen, Portantino

ASM LOCAL GOVERNMENT: 8-0-1

YES: Juan Carrillo, Waldron, Haney, Kalra, Pacheco, Ramos, Ward, Wilson

ABS, ABST OR NV: Essayli

ASM HOUSING AND COMMUNITY DEVELOPMENT: 8-0-1

YES: Ward, Joe Patterson, Grayson, Kalra, Lee, Quirk-Silva, Reyes, Wilson

ABS, ABST OR NV: Sanchez

ASM APPROPRIATIONS: 11-1-3

YES: Wicks, Arambula, Bryan, Calderon, Wendy Carrillo, Mike Fong, Grayson, Haney, Hart, Pellerin, Ta

NO: Dixon

ABS, ABST OR NV: Sanchez, Jim Patterson, Villapudua

UPDATED

VERSION: August 22, 2024

CONSULTANT: Linda Rios / L. GOV. / (916) 319-3958 FN: 0004445

SENATE THIRD READING

STR Bill Id:SB 937

Author:(Wiener)

As Amended Ver:June 27, 2024

Majority vote

SUMMARY

This bill extends development entitlements for a designated housing development project, as defined, by two years and places restrictions on the fees and charges a local agency may impose on these projects.

Major Provisions

1. Defines a "designated residential development project" as a residential development that meets any of the following conditions:
   1. Dedicates 100% of units, except manager's units, to lower income households, is entitled to a density bonus, or includes 10 or fewer units.
   2. Meets the affordable housing or mixed-income requirements of AB 2011 (Wicks) Chapter 647, Statutes of 2022.
   3. Meets the requirements for streamlined ministerial approval under SB 423 (Wiener) Chapter 778, Statutes of 2023.
   4. Meets the requirements for developments on land owned by institutions of faith or independent institutions of education under SB 4 (Wiener), Chapter 771, Statutes of 2023.
2. For a designated residential development project, extends by 24 months the timeframe for any housing entitlement issued before, and in effect on, January 1, 2024, and that will expire before December 31, 2025. Excludes entitlements granted an extension by a local agency between January 1, 2024, and the effective date of this bill from the extension granted by this bill.
3. Requires an extension granted pursuant to 2, above, to be tolled during any period the housing entitlement is the subject of a legal challenge.
4. Establishes that nothing in the bill is intended to preclude a local government from exercising its existing authority to provide extension to an entitlement identified in this section.
5. If a local agency imposes fees or charges on a designated residential development project for the construction of public improvements or facilities, the following apply, among other provisions:
   1. The local agency may not require the payment of those fees or charges until the date the first certificate of occupancy or first temporary certificate of occupancy is issued, whichever occurs first, unless construction of the residential development does not begin within five years of the date the building permit was issued.
   2. The local agency may collect utility service fees related to connections at the time an application for service is received, provided those fees do not exceed the costs incurred by the utility provider resulting from the connection activities.
   3. The local agency may withhold a certificate of occupancy or temporary certificate of occupancy until payment of those fees or charges is received.
6. If a local agency does not issue certificates of occupancy for designated residential development projects, requires the final inspection to serve as the certificate of occupancy.
7. If a local agency requires a property owner or lessee to execute a contract to pay outstanding fees or charges as a condition of issuing the building permit, allows the local agency to authorize an officer or employee of the local agency to approve and execute contracts on its behalf. A local agency, prior to the execution of a contract, must post a model form of the contract on its internet website, as specified.

COMMENTS

1. Mitigation Fee Act. When approving development projects, counties and cities can require the applicants to mitigate the project's effects by paying fees—known as mitigation fees, impact fees, or developer fees. The California courts have upheld impact fees for sidewalks, parks, school construction, and many other public purposes.

When establishing, increasing, or imposing a fee as a condition of approving a development project, the Mitigation Fee Act requires local officials to:

• 1. Identify the fee's purpose.
  2. Identify the fee's use, including the public facilities to be financed.
  3. Determine a reasonable relationship between the fee's use and the development.
  4. Determine a reasonable relationship between the public facility's need and the development.

When imposing a fee as a condition of approving a development project, the Mitigation Fee Act also requires local officials to determine a reasonable relationship between the fee's amount and the cost of the public facility. In its 1987 Nollan decision, the U.S. Supreme Court said there must be an "essential nexus" between a project's impacts and the conditions for approval. In the 1994 Dolan decision, the U.S. Supreme Court said that conditions on development must have a "rough proportionality" to a project's impacts.

In the 1996 Ehrlich decision, the California Supreme Court distinguished between "legislatively enacted" conditions that apply to all projects and "ad hoc" conditions imposed on a project-by- project basis. Ehrlich applied the "essential nexus" test from Nollan and the "rough proportionality" test from Dolan to "ad hoc' conditions. The Court did not apply the Nollan and Dolan tests to the conditions that were "legislatively enacted." In other words, local officials have generally faced greater scrutiny when they impose conditions on a project-by-project basis. As a result of these decisions and the Mitigation Fee Act, local agencies have conducted nexus studies to ensure any proposed impact fees meet these legal tests for most impact fees. Other requirements in the Mitigation Fee Act ensure that impact fees are appropriately levied and spent.

On April 12 of this year, the United States Supreme Court decided Sheetz v. County of El Dorado, California. The case involved the takings clause of the Fifth Amendment to the U.S. Constitution. An El Dorado County resident challenged the county's legislatively enacted traffic impact mitigation fee, arguing the county should only charge him based on the impact associated with his specific parcel. The main question was whether or not the same standards of "essential nexus" and "rough proportionality" apply to legislatively enacted fees as they do to ad-hoc fees.

In the Sheetz decision, the Court stated, "A legislative exception to the Nollan/Dolan test 'conflicts with the rest of our takings jurisprudence,' which does not otherwise distinguish between legislation and other official acts. Knick v. Township of Scott, 588 U. S. 180, 185 (2019)." The Court also proclaimed that, "...as we have explained, a legis­lative exception to the ordinary takings rules finds no sup­port in constitutional text, history, or precedent. We do not address the parties' other disputes over the va­lidity of the traffic impact fee, including whether a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development. The California Court of Appeal did not consider this point—or any of the parties' other nuanced arguments—because it proceeded from the erroneous premise that legislative permit condi­tions are categorically exempt from the requirements of Nollan and Dolan. Whether the parties' other arguments are preserved and how they bear on Sheetz's legal challenge are for the state courts to consider in the first instance."

In addition, Justice Kavanaugh filed a concurring opinion, in which Justices Kagan and Jackson joined saying that, "I join the Court's opinion. I write separately to underscore that the Court has not previously decided—and today explicitly declines to decide—whether 'a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development.' Ante, at 10–11. Importantly, therefore, today's decision does not address or prohibit the common government practice of imposing permit conditions, such as impact fees, on new developments through reasonable formulas or schedules that assess the impact of classes of development rather than the impact of specific parcels of property. Moreover, as is apparent from the fact that today's decision expressly leaves the question open, no prior decision of this Court has addressed or prohibited that longstanding government practice."

1. Impact Fee Collection. Generally, cities and counties cannot collect impact fees before they conduct the final inspection or issue a certificate of occupancy, whichever occurs first. Utilities can collect impact fees at the time the utility receives an application for service, which can happen before a final inspection. For residential developments with more than one dwelling, the local agency can determine whether developers pay fees on a pro rata or on a lump sum basis when the first dwelling in the development receives its final inspection or certificate of occupancy, whichever occurs first.

However, current law allows a local agency to require payment earlier than described above if it has determined that the fees or charges will be collected for public improvement of facilities for which an account has been established. This requirement does not apply to a nonprofit housing developer that reserves at least 49% of units for lower income households. Cities and counties can require performance bonds or letters of credit to guarantee these specific payments.

If the developer has not fully paid the impact fees before the local agency has issued a building permit for construction of any portion of the residential development, the local agency can require the developer, as a condition of receiving the building permit, to enter into a contract to pay the fees, secured by a lien on the property. Additionally, the local agency can require the developer to provide notification of the opening of any escrow for the sale of the property, and disclose in the escrow instructions that the fees must be paid before disbursing proceeds to the seller. The local agency can defer collection of one or more fees up to the close of escrow.

This bill prohibits the collection of fees prior to the issuance of a certificate of occupancy or the final inspection for designated residential development project", as defined.

1. Entitlements and Extensions. In general, constructing a housing development project requires local government approval at multiple stages; this approval process is often referred to as the entitlement process. An approval is generally considered an entitlement when it locks in the regulatory standards that a local government or state agency can apply to a project. Entitlements are powerful documents as they provide certainty to developers, which can help them secure financing for a project. However, entitlements also constrain the ability of local governments and state agencies to adjust for new conditions. Additionally, when an issued entitlement is outstanding, it alters the ability of the local government or state agency to approve other projects that could potentially be impacted by the pending project. Therefore, various entitlements are subject to expiration, although many may be extended at the discretion of the local government or state agency.

The Legislature has occasionally sought to assist developers by extending certain entitlements. For example, AB 1561 (C. Garcia and Grayson) Chapter 195, Statutes of 2020 included a provision for an 18-month extension for planning level and pre-building permit entitlements that were issued prior to the COVID State of Emergency declared by the Governor on March 4, 2020 and were set to expire prior to December 31, 2021. This bill, in recognition of factors such as rising interest rates, changes in insurance markets, and labor and construction costs, provides a 24-month extension for entitlements for priority residential development projects, as defined.

According to the Author

"Senate Bill 937 seeks to minimize the impact of market fluctuations and high interest rates on housing production by delaying development fees and providing additional time post-entitlement. "Many cities have deferred the collection of development fees during periods of economic hardship to prevent housing production from halting. Additionally, economic volatility can cause some projects to die because their entitlements expire before the developer can raise the money to complete the project. Cities grant entitlements to developers as the last step before construction begins, but they are typically only valid for a limited period before expiring. With today's high interest rates and rising costs driven by COVID-related inflation, developers are facing a challenge to make projects pencil. "SB 937 helps address these concerns by delaying the payment of development fees imposed by a local government until the certificate of occupancy is issued. Local governments may not charge interest rates on any deferred fees. Further, SB 937 provides developers with much-needed wiggle room by extending housing entitlements issued prior to Jan. 1, 2024 and set to expire on or before Dec. 31, 2025 by 18 months. These provisions will ensure market conditions do not dampen California's work towards addressing our housing crisis."

Arguments in Support

According to LeadingAge California, "Currently, local governments may apply fees on development projects if the revenue is utilized for necessary services and improvements for their growing population. While development fees are an expected part of construction, they are nonetheless a burden and barrier to new development. SB 937 seeks to strike a balance between the needs of local governments and providing the flexibility developers require to ensure that housing units are built by deferring – not eliminating or decreasing – these fees until the certificate of occupancy. Deferring fees allows projects to pay impact fees after construction rather than before construction. In a high interest rate environment, this change will result in significant savings on financing costs, rendering more projects financially feasible and allowing them to move forward, providing housing, jobs, and tax revenue.

"Housing projects that have gone through the process of getting an entitlement may also be hampered by shifting market conditions. To curb growing inflation, the Federal Reserve has regularly raised interest rates over the past two years. While these increases helped stifle rapidly growing inflation, loans for acquiring properties or funding development projects became too expensive and crippled the viability of many projects already in the pipeline. As interest rates begin to lower, the financing for some projects might again be possible, but in the interim, projects have had their entitlements expire, requiring them to restart the process anew. SB 937 provides temporary relief in these instances, offering an extension of existing entitlements. At a time where the state's investment in affordable housing is uncertain, the Legislature should support solutions that help produce housing while not putting further strain on the state's general fund."

Arguments in Opposition

The California Special Districts Association, California Fire Chiefs Association, and Fire Districts Association of California write in opposition, "Development related fees pay for the costs to install infrastructure necessary to build new homes and other developments in livable, equitable, and thriving communities. These fees pay for critical services such as water, sewer, fire protection, parks and open space, flood protection, libraries, and other essential needs. "Specifically, these fees and the infrastructure they fund make new housing and economic development possible. SB 937 would, among other things, for certain developments, defer development impact fees until the certificate of occupancy or its equivalent, locks in those fees at prior to the issuance of a building permit, and prohibit the charging on interest on those deferred fees.

"While we are grateful for Senator Wiener's efforts to dialogue and find compromise, having made several substantive amendments to date, we find that the measure would still benefit from several changes to mitigate the fiscal challenges it presents to local agencies and their efforts to provide essential services and infrastructure."

FISCAL COMMENTS

No state costs. Local administrative costs to cities and counties of an unknown, but likely minor amount to extend designated residential development project entitlements and delay the collection of certain impact fees. These costs are not state-reimbursable because local agencies have general authority to adjust planning and permitting fees to cover their administrative expenses associated with new planning mandates.

Additionally, the bill might delay a local agency's collection of impact fees. The magnitude of any local impacts associated with such a delay is unknown and would vary depending on the dollar amount of the fees deferred and length of the delay.

VOTES

SENATE FLOOR: 36-0-4

YES: Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Newman, Niello, Ochoa Bogh, Padilla, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

ABS, ABST OR NV: Allen, Min, Nguyen, Portantino

ASM LOCAL GOVERNMENT: 8-0-1

YES: Juan Carrillo, Waldron, Haney, Kalra, Pacheco, Ramos, Ward, Wilson

ABS, ABST OR NV: Essayli

ASM HOUSING AND COMMUNITY DEVELOPMENT: 8-0-1

YES: Ward, Joe Patterson, Grayson, Kalra, Lee, Quirk-Silva, Reyes, Wilson

ABS, ABST OR NV: Sanchez

ASM APPROPRIATIONS: 11-1-3

YES: Wicks, Arambula, Bryan, Calderon, Wendy Carrillo, Mike Fong, Grayson, Haney, Hart, Pellerin, Ta

NO: Dixon

ABS, ABST OR NV: Sanchez, Jim Patterson, Villapudua

UPDATED

VERSION: June 27, 2024

CONSULTANT: Linda Rios / L. GOV. / (916) 319-3958 FN: 0003802

Date of Hearing: August 7, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

SBPCA Bill Id:SB 937

Author:(Wiener) – As Amended Ver:June 27, 2024

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill extends development entitlements for a designated housing development project, as defined, by two years and places restrictions on the fees and charges a local agency may impose on these projects.

Among its provisions, this bill:

1. Defines a “designated residential development project” as a residential development that meets any of the following conditions:
   1. Dedicates 100% of units, except manager’s units, to lower income households, is entitled to a density bonus, or includes 10 or fewer units.
   2. Meets the affordable housing or mixed-income requirements of AB 2011 (Wicks) Chapter 647, Statutes of 2023.
   3. Meets the requirements for streamlined ministerial approval under SB 423 (Wiener) Chapter 778, Statutes of 2023.
   4. Meets the requirements for developments on land owned by institutions of faith or independent institutions of education under SB 4 (Wiener), Chapter 771, Statutes of 2023.
2. For a designated residential development project, extends by 24 months the timeframe for any housing entitlement issued before, and in effect on, January 1, 2024, and that will expire before December 31, 2025. Excludes entitlements granted an extension by a local agency between January 1, 2024, and the effective date of this bill from the extension granted by this bill.
3. Requires an extension granted pursuant to 2, above, to be tolled during any period the housing entitlement is the subject of a legal challenge.
4. If a local agency imposes fees or charges on a designated residential development project for the construction of public improvements or facilities, the following apply, among other provisions:
   1. The local agency may not require the payment of those fees or charges until the date the first certificate of occupancy or first temporary certificate of occupancy is issued, whichever occurs first, unless construction of the residential development does not begin within five years of the date the building permit was issued.
   2. The local agency may collect utility service fees related to connections at the time an application for service is received, provided those fees do not exceed the costs incurred by the utility provider resulting from the connection activities.
   3. The local agency may withhold a certificate of occupancy or temporary certificate of occupancy until payment of those fees or charges is received.
5. If a local agency does not issue certificates of occupancy for designated residential development projects, requires the final inspection to serve as the certificate of occupancy.
6. If a local agency requires a property owner or lessee to execute a contract to pay outstanding fees or charges as a condition of issuing the building permit, allows the local agency to authorize an officer or employee of the local agency to approve and execute contracts on its behalf. A local agency, prior to the execution of a contract, must post a model form of the contract on its internet website, as specified.

FISCAL EFFECT:

No state costs. Local administrative costs to cities and counties of an unknown, but likely minor amount to extend designated residential development project entitlements and delay the collection of certain impact fees. These costs are not state-reimbursable because local agencies have general authority to adjust planning and permitting fees to cover their administrative expenses associated with new planning mandates.

Additionally, the bill might delay a local agency’s collection of impact fees. The magnitude of any local impacts associated with such a delay is unknown and would vary depending on the dollar amount of the fees deferred and length of the delay.

COMMENTS:

1. Purpose. According to the author:

[This bill] seeks to minimize the impact of market fluctuations and high interest rates on housing production by delaying development fees and providing additional time post-entitlement.

Many cities have deferred the collection of development fees during periods of economic hardship to prevent housing production from halting. Additionally, economic volatility can cause some projects to die because their entitlements expire before the developer can raise the money to complete the project. With today’s high interest rates and rising costs driven by COVID-related inflation, developers are facing a challenge to make projects pencil. [This bill] will ensure market conditions do not dampen California’s work towards addressing our housing crisis.

1. Background. Housing Entitlements. Existing law, the Permit Streamlining Act, among other things, requires a public agency that is the lead agency for a development project to approve or disapprove that project within specified time periods. This approval process is known as the entitlement process. A project approval is generally considered an entitlement when it locks in the regulatory standards a local government or state agency may apply to a project. Entitlements provide certainty to developers, which can help developers secure financing for a project. However, entitlements also constrain the ability of local governments and state agencies to adjust for new conditions. Accordingly, various entitlements are subject to expiration, although many may be extended at the discretion of the local government or state agency.

Existing law, enacted by AB 1561 (C. Garcia), Chapter 195, Statutes of 2020, provided an 18-month extension for housing entitlements issued prior to March 4, 2020, (the date of the declared COVID-19 state of emergency) and set to expire prior to December 31, 2021. AB 1561 excluded development agreements, preliminary applications, SB 35 ministerial approvals, and subdivision maps that received a discretionary extension after March 4, 2020. AB 1561 also excluded entitlements granted an 18-month extension by a local government prior to the date AB 1561 took effect from the extension granted by the bill. This bill provides a similar 24-month extension for entitlements for designated residential development projects.

Mitigation Fee Act. The Mitigation Fee Act governs the imposition, collection, and use of impact fees collected by local governments when reviewing and approving development proposals. These fees go toward infrastructure development or other public benefits, such as new parks, schools, or affordable housing. Generally, cities and counties may not collect impact fees before they conduct the final inspection or issue a certificate of occupancy, whichever occurs first. However, a city or county may require earlier payment if the fees or charges are for public improvement of facilities for which an account has been established, and it may require performance bonds or letters of credits to guarantee these specific payments. Utilities may collect impact fees when the utility receives an application for service, which can happen before a final inspection. If the developer has not fully paid the impact fees before the local agency has issued a building permit for construction of any portion of the residential development, the local agency may require the developer, as a condition of receiving the building permit, to enter into a contract to pay the fees, secured by a lien on the property.

According to the bill’s co-sponsors, impact fees “are a burden and can be a barrier to new development. Deferring fees can result in less reliance on pre-development funding, which is often more expensive or difficult to secure.” This bill removes the ability of a local agency to collect impact fees on designated residential development projects before the final inspection or the date of the certificate of occupancy.

1. Related Legislation. AB 2729 (Joe Patterson), of this legislative session, is similar to, and conflicts with, this bill. SB 2729 provides an 18-month extension for housing development entitlements, including for market-rate housing developments, issued before January 1, 2024, and that will expire before December 31, 2025, except as specified. AB 2729 also makes changes to the impact fee collection process. AB 2729 is pending on the Senate Floor.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: June 26, 2024

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

Christopher M. Ward, Chair

SBPCA Bill Id:SB 937

Author:(Wiener) – As Amended Ver:June 17, 2024

SENATE VOTE: 36-0

SUBJECT: Development projects: permits and other entitlements: fees and charges

SUMMARY: Extends development entitlements for certain housing development projects by two years and places certain restrictions on the fees and charges a local agency may impose on these projects. Specifically, this bill:

1. Defines “priority residential development project” as a residential development that meets any of the following conditions:
   1. Contains 10 units or less with the exception of manager’s units;
   2. Contains 100% affordable units;
   3. Meets the affordable housing or mixed-income requirements of AB 2011 (Wicks) Chapter 647, Statutes of 2023;
   4. Meets the requirements for streamlined ministerial approval under SB 423 (Wiener) Chapter 778, Statutes of 2023;
   5. Meets the requirements for developments on land owned by institutions of faith or independent institutions of education under SB 4 (Wiener), Chapter 771, Statutes of 2023; or
   6. Is entitled to a density bonus.
2. Defines “housing entitlement” as any of the following:
   1. A legislative, adjudicative, administrative, or any other kind of approval, permit, or other entitlement necessary for, or pertaining to, a housing development project issued by a state agency;
   2. An approval, permit, or other entitlement issued by a local agency for a housing development project that is subject to the Permit Streamlining Act;
   3. A ministerial approval, permit, or entitlement by a local agency required as a prerequisite to issuance of a building permit for a housing development project;
   4. A requirement to submit an application for a building permit within a specified period after the effective date of a housing entitlement; or
   5. A vested right associated with an approval, permit, or other entitlement.
3. Provides that a “housing entitlement” does not include:
   1. Development agreements;
   2. Approved or conditionally approved subdivision map acts that have already been extended pursuant to SB 9 (Atkins) Chapter 162, Statutes of 2021; or
   3. Preliminary applications under the Housing Crisis Act of 2019 (SB 330, Skinner, Chapter 654, Statutes of 2019).
4. Extends by 24 months for priority residential development projects the timeframe for any housing entitlement that was issued before, and was in effect on, January 1, 2024, and will expire before December 31, 2025. Further provides that:
   1. If a state or local agency extends a housing entitlement between January 1, 2024 and the effective date of this bill, that housing entitlement shall not be extended for an additional 24 months;
   2. The 24-month extension in this bill shall be tolled during any period that the housing entitlement is the subject of a legal challenge; and
   3. Nothing in this bill shall preclude a local government from providing an extension in addition to the 24 months specified in this bill.
5. Provides that utility service fees related to connections may be collected when a service application is received, provided those fees do not exceed the costs incurred by the utility provider resulting from the connection activities.
6. Provides that when a local agency requires a property owner or lessee to execute a contract to pay any outstanding fees or charges as a condition of issuing the building permit, the local agency may authorize an officer or employee of the local agency to approve and execute contracts on its behalf. Requires a local agency, prior to execution of a contract, to post a model form of the contract on its website, if the local agency maintains an internet website.
7. Establishes, for priority residential development projects, that if a local agency imposes any fees or charges on the housing development for the construction of public improvements or facilities, then all of the following conditions apply:
   1. The local agency is prohibited from requiring the payment of those fees or charges until the date the certificate of occupancy is issued, unless construction of the residential development does not begin within five years of the date upon which the building permit was issued;
   2. Utility service fees related to connections may be collected at the time of application for service is received, provided that those fees do not exceed the costs incurred by the utility provider resulting from the connection activities; and
   3. Requires the amount of fees and charges to be the same amount as would have been paid had they been paid prior to the issuance of building permits. Prohibits the local agency from charging interest or other fees on any deferred amount.
   4. Provides that if the housing development includes more than one dwelling, the local agency may determine whether fees and charges shall be paid:
      1. On a pro rata basis for each dwelling when it receives its certificate of occupancy;
      2. On a pro rata basis when a certain percentage of the dwellings have received their certificate of occupancy; or
      3. On a lump sum basis when all the dwellings in the development receive their certificate of occupancy.
8. Provides exceptions to 7), for projects that do not have at least 49% of the units reserved for lower income households, if the local agency determines that the fees or charges will be collected for public improvements or facilities that already have an account established with funds appropriated, and where the local agency has adopted a proposed construction schedule or plan that will begin prior to final inspection or issuance of the certificate of occupancy. Also provides an exception to the same group of projects for fees or charges to reimburse the local agency for expenditures previously made.
9. Provides that if the local agency does not issue certificates of occupancy for these types of housing developments, the final inspection shall serve as the certificate of occupancy.
10. Provides that no reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this bill.

EXISTING LAW:

1. Prohibits a local agency that imposes any fees or charges on a residential development for the construction of public improvements or facilities from requiring the payment of those fees or charges until the date of the final inspection, or the date the certificate of occupancy is issued, whichever occurs first, with specified exceptions. (Government Code (GC) Section 66007)
   
2. Exempts a local government from the above prohibition if it determines that the fees or charges will be collected for public improvements or facilities for which an account has been established and funds appropriated, and for which the local government has adopted a proposed construction schedule or plan prior to final inspection or issuance of the certificate of occupancy; or the fees or charges are to reimburse the local government for expenditures previously made.
   1. This exception does not apply to units reserved for occupancy by lower income households included in a residential development proposed by a nonprofit housing developer in which at least 49% of the total units are reserved for occupancy by lower income households, as defined. A city or county may require a performance bond or letter of credit to guarantee the payment of the nonprofit housing developer’s fees. (GC 66007)
3. Provides that if any fee or charge in (1) is not fully paid prior to the issuance of a building permit, the local agency issuing the building permit may require the property owner, or lessee if the lessee’s interest appears of record, as a condition of issuing a building permit, to execute a contract to pay the fee or charge, or applicable portion, within the time specified in (1). If the fee or charge is prorated, the obligation under the contract shall be similarly prorated. (GC 66007)
   
4. Allows a local agency to defer the collection of one or more fees up to the close of escrow. (GC 66007)
   

FISCAL EFFECT: Unknown.

COMMENTS:

Author’s Statement: According to the author, “Senate Bill 937 seeks to minimize the impact of market fluctuations and high interest rates on housing production by delaying development fees and providing additional time post-entitlement.

Many cities have deferred the collection of development fees during periods of economic hardship to prevent housing production from halting. Additionally, economic volatility can cause some projects to die because their entitlements expire before the developer can raise the money to complete the project. Cities grant entitlements to developers as the last step before construction begins, but they are typically only valid for a limited period before expiring. With today’s high interest rates and rising costs driven by COVID-related inflation, developers are facing a challenge to make projects pencil.

SB 937 helps address these concerns by delaying the payment of development fees imposed by a local government until the certificate of occupancy is issued. Local governments may not charge interest rates on any deferred fees. Further, SB 937 provides developers with much-needed wiggle room by extending housing entitlements issued prior to Jan. 1, 2024 and set to expire on or before Dec. 31, 2025 by 18 months. These provisions will ensure market conditions do not dampen California’s work towards addressing our housing crisis.”

Cost of Building Housing: It is expensive to build housing in California. The UC Berkeley Terner Center finds that challenging macroeconomic conditions, including inflation and high interest rates, affect the availability and cost of capital, resulting in rising costs for labor and materials.^[1] Furthermore, workforce and supply shortages have exacerbated the already high price of construction in Cali­fornia, and economic uncertainty has made equity partners and lenders apprehensive about financing new housing development proposals.^[2]

An analysis by the California Housing Partnership compares the cost of market rate development prototypes developed by the Terner Center with the median cost of developing affordable rental homes. In the four regions analyzed, the study found that the cost of developing one unit of affordable housing ranged from approximately $480,000 to $713,000, while the cost of developing one unit of market rate housing in the state ranged from approximately $508,000 to $637,000.^[3] While affordable housing and market rate housing share many of the same cost constraints, affordable housing developments often are more expensive to build on a per unit basis due to various factors. These include the complexity associated with obtaining the necessary financing and various regulatory requirements.

Impact Fees and Exactions: Development fees serve many purposes and can be broadly divided into two categories: service fees and impact fees. Service fees cover staff hours and overhead, and are used to fund the local agency’s role in the development process such as paying for plan reviews, permit approvals, inspections, and any other services related to a project moving through various local departments. Impact fees refer generally to fees that offset the public costs of new infrastructure incurred by the larger community. In the wake of the passage of Proposition 13 in 1978 and the loss of significant property tax revenue, local governments have also turned to development fees as a means to pay for new infrastructure. According to the UC Berkeley Terner Center for Housing Innovation, between 2008 and 2015, California fees rose 2.5%, while the national average decreased by 1.2%.^[4] Development fees can comprise 17% of the total development costs of new housing, and in California in 2015, impact fees were nearly three times the national average.^[5]

The Mitigation Fee Act governs the imposition, collection, and use of impact fees collected by local governments when reviewing and approving development proposals.

Key aspects of the Mitigation Fee Act include:

1. Nexus Requirement: The Act requires a clear "nexus" or connection between the fee charged and the impact created by the development, typically established via a nexus study. This means that the fees collected must be used to address the specific impacts that the new development is expected to have on public facilities and services.
2. Proportionality: The fees charged must be proportional to the impact of the development.
3. Accountability: Local governments are required to establish separate accounts for the fees collected and to use the funds solely for the intended purposes. They must also provide annual reports on the status of the fees, including the balance and how the funds have been used.
4. Timing of Fee Payment: The Act specifies when fees can be collected, generally at the time of final inspection or when certificate of occupancy is issued, with some exceptions, as specified below in the “Collection of Impact Fees” section. This bill would remove those exceptions.
5. Refunds: If the fees collected are not used within five years, and specific findings are not made, the Act provides for the refund of the fees.

When imposing a fee as a condition of approving a development project, the Mitigation Fee Act also requires local officials to determine a reasonable relationship between the fee’s amount and the cost of the public facility. In its 1987 Nollan decision, the U.S. Supreme Court said there must be an “essential nexus” between a project's impacts and the conditions for approval. In the 1994 Dolan decision, the U.S. Supreme Court said that conditions on development must have a "rough proportionality" to a project's impacts.

In the 1996 Ehrlich decision, the California Supreme Court distinguished between “legislatively enacted” conditions that apply to all projects and “ad hoc” conditions imposed on a project-by- project basis. Ehrlich applied the “essential nexus” test from Nollan and the “rough proportionality” test from Dolan to “ad hoc’ conditions. The Court did not apply the Nollan and Dolan tests to the conditions that were “legislatively enacted.” In other words, local officials face greater scrutiny when they impose conditions on a project-by-project basis.

However, in an April 2024 ruling in Sheetz v. El Dorado County, the U.S. Supreme Court ruled that exactions imposed legislatively are also subject to the Nollan/Dolan tests. This means that the court ruled that legislatively enacted conditions must also have an “essential nexus” between the proposed project’s impact and the associated exactions, and be “roughly proportional” to the impact.

Collection of Impact Fees: Generally, cities and counties cannot collect impact fees before they conduct the final inspection or issue a certificate of occupancy, whichever occurs first. Utilities can collect impact fees when the utility receives an application for service, which can happen before a final inspection. For residential developments with more than one dwelling, the local agency can determine whether developers pay fees on a pro rata or on a lump sum basis when the first dwelling in the development receives its final inspection or certificate of occupancy, whichever occurs first.

However, current law allows a local agency to require payment earlier than described above if it has determined that the fees or charges will be collected for public improvement of facilities for which an account has been established. This requirement does not apply to a nonprofit housing developer that reserves at least 49% of units for lower income households. Cities and counties can require performance bonds or letters of credits to guarantee these specific payments.

If the developer has not fully paid the impact fees before the local agency has issued a building permit for construction of any portion of the residential development, the local agency can require the developer, as a condition of receiving the building permit, to enter into a contract to pay the fees, secured by a lien on the property. Additionally, the local agency can require the developer to provide notification of the opening of any escrow for the sale of the property, and disclose in the escrow instructions that the fees must be paid before disbursing proceeds to the seller. The local agency can defer collection of one or more fees up to the close of escrow.

This bill would remove from existing law the ability of a local agency to collect impact fees or charges on “priority residential development projects,” as defined, before the final inspection or the date of the certificate of occupancy for all residential developments in all circumstances. Deferring fees as proposed may increase financial feasibility for housing developments in the current high interest rate environment, by allowing development proponents to pay impact fees after construction, rather than before the construction of a proposed development occurs.

Entitlements and Extensions: Local governments review and approve housing development proposals at multiple stages. The planning review and approval process is known as “entitlement” – in which a local planning department reviews the development for conformance with all relevant planning and land use provisions. Entitlements are powerful as they provide a level of certainty to developers, affirming that the project they are proposing is generally permissible in terms of location, use, and layout to the local government. Once a project is entitled, developers can proceed to the permitting stage for the project, involving the development of detailed structural, electrical, and mechanical plans for the project, among others. Developers also have an easier time obtaining financing for a project once it is entitled, as the lender will have more certainty that the project is likely to move forward.

Local governments typically set their own timelines for planning approval and entitlement expiration through local Municipal Codes, unless otherwise established through state legislation. There is typically language in the local Municipal Code stating that a certain action must be taken (e.g. site or building permit issued or tentative map approved) within a period of time or the entitlement will expire, or require an extension of time from the authorizing body. The local policies and procedures surrounding the granting of these extensions vary from jurisdiction to jurisdiction. AB 1561 (C. Garcia and Grayson) Chapter 195, Statutes of 2020 included a provision for an 18-month extension for planning level and pre-building permit entitlements that were issued prior to the COVID State of Emergency declared by the Governor on March 4, 2020, and were set to expire before December 31, 2021. SB 423 (Wiener), Chapter 778, Statutes of 2023, provides that a local government’s approval for certain housing projects shall not expire under the provision of the bill.

This bill, in recognition of factors such as rising interest rates, changes in insurance markets, and labor and construction costs, provides a 24-month extension for entitlements for “priority residential development projects,” as defined.

Policy Consideration: This bill would create a new classification of residential housing developments in state law, “priority residential development projects.” These “priority residential development projects” are defined as meeting any of the following conditions:

1. Projects with 10 units or less, exclusive of any managers’ units;
2. 100% affordable developments;
3. Development meeting the affordable housing or mixed-income requirements of AB 2011 (Wicks) Chapter 647, Statutes of 2023;
4. Developments meeting the requirements for streamlined ministerial approval under SB 423 (Wiener) Chapter 778, Statutes of 2023;
5. Developments on land owned by institutions of faith or independent institutions of education under SB 4 (Wiener), Chapter 771, Statutes of 2023; or
6. Developments using State Density Bonus Law.

Only “priority residential development projects” would be eligible for the entitlement extension and fee deferral provisions under this bill. It is possible that in establishing a “priority” classification of housing developments under state law, any housing development not meeting the above conditions would implicitly be “non-priority” in subsequent state and local legislation and decision-making. While the group of development projects included in this definition surely are necessary when it comes to meeting the state’s housing production and affordability goals, that is not to say that other housing typologies are not. California needs every tool available in its toolkit to combat the housing crisis.

Arguments in Support: According to the bill’s co-sponsors, the Housing Action Coalition, California Housing Consortium, and California YIMBY, “SB 937 does not eliminate fees; it simply changes when the fees are collected. SB 937 seeks to strike a balance between meeting the needs of local governments and providing the flexibility developers require to ensure that housing units are built. While impact fees are an expected part of construction, they are a burden and can be a barrier to new development. Fees range significantly between jurisdictions, with Los Angeles reporting a multifamily development fee of $12,000 per unit, while Fremont reports $75,0001. Deferring fees can result in less reliance on pre-development funding, which is often more expensive or difficult to secure.

…

Additionally, SB 937 provides an entitlement extension to development projects that were negatively impacted by COVID-related inflation and are at risk of not being built. To curb growing inflation, the Federal Reserve has regularly raised interest rates over the past two years. While these increases helped stifle rapidly growing inflation, loans for acquiring properties or funding development projects became too expensive and crippled the viability of many projects. As interest rates begin to lower, the financing for some projects might again be possible, but these projects will not be built unless an entitlement extension can be provided. SB 937 provides a solution to this problem by extending housing entitlements issued prior to January 1, 2024, and set to expire on or before December 31, 2025, by 24 months. This extension would only be provided to developments that have a high percentage of affordable units.”

Arguments in Opposition: According to the Kern County Superintendent of Schools, “SB 937 (Wiener) would significantly delay the construction of new schools which are greatly needed. The delaying of those funds will continue to exacerbate overcrowding challenges and impede the state’s ability to provide adequate school facilities for all students as required by the California Constitution. As state and local governments work to address our state’s housing shortage, the education sector races to build school facilities to serve those residents.

I urge you to consider the potential negative impacts of SB 937 (Wiener) and to oppose its passage. Our students and staff deserve a safe and appropriate educational environment.”

Related Legislation:

AB 2729 (Joe Patterson): This bill proposes various changes to the process for local agencies for local agencies to collect development impact fees for development projects. AB 2729 passed out of the Assembly and is pending in the Senate Committee on Local Government.

AB 1386 (Chen) of 2019: This was a substantially similar bill. AB 1386 was never heard in Assembly Local Government Committee.

AB 2604 (Torrico), Chapter 246, Statutes of 2008: Authorized a local agency to defer the collection of one of more fees up to the close of escrow.

AB 641 (Torrico), Chapter 603, Statues of 2007: Prohibited local governments from requiring the payment of local developer fees before the developer has received a certificate of occupancy, pursuant to a specified exemption, for any housing development in which at least 49 percent of the units are affordable to low or very low income households.

Committee Amendments: The committee may wish to consider the following amendments:

1. Renaming “priority residential development projects” to “designated residential development projects” for purposes of this bill, so as to not implicitly create a category of “non-priority” residential development projects in state law.
2. Clarifying the provisions and requirements around certificates of occupancies, as follows:
   1. Permitting local agencies to require the payment of fees for “priority residential development projects,” or “designated residential development projects,” if amendment #1 is taken, at the first certificate of occupancy, or first temporary certificate of occupancy, whichever is first; and
   2. Permitting a local agency to withhold a certificate of occupancy, including temporary certificates of occupancies, until a payment of fees and charges is received for “priority residential development projects.”

Double referred: This bill is double referred. It was heard in the Assembly Committee on Local Government and passed on a vote of 8-0 on June 12, 2024.

REGISTERED SUPPORT / OPPOSITION:

Support

California Housing Consortium (Co-Sponsor)

California YIMBY (Co-Sponsor)

Housing Action Coalition (Co-Sponsor)

21st Century Alliance

Alexander Pedersen - Capitola City Councilmember

American Institute of Architects California

Bakersfield City Councilmember, Andrae Gonzales

Bay Area Council

California Apartment Association

Chris Ricci - Modesto City Councilmember

City of Berkeley Councilmember Rashi Kesarwani

City of Gilroy Council Member Zach Hilton

City of Santa Monica Council Member Jesse Zwick

Claremont City Councilmember, Jed Leano

East Bay for Everyone

East Bay YIMBY

Eastside Housing for All

Fremont for Everyone

Gabe Quinto, Councilmember, City of El Cerrito

Generation Housing

Grow the Richmond

Habitat for Humanity California

House Sacramento

How to ADU

Livable Communities Initiative

Mountain View YIMBY

Napa-Solano for Everyone

Northern Neighbors

Peninsula for Everyone

People for Housing - Orange County

People for Housing Orange County

Progress Noe Valley

San Francisco YIMBY

San Luis Obispo YIMBY

San Mateo City Council Member Amourence Lee

Santa Cruz YIMBY

Santa Rosa YIMBY

South Bay YIMBY

Southside Forward

Southwest California Legislative Council

Streets for People

Sunnyvale City Council Member Alysa Cisneros

Supervisor Jaron Brandon, Tuolumne County

Tri County Chamber Alliance

Urban Environmentalists

Ventura County YIMBY

YIMBY SLO

Support If Amended

California Building Industry Association

Fieldstead and Company

Housing Leadership Council of San Mateo County

Silicon Valley Leadership Group

SPUR

YIMBY Action

Opposition

City of Santa Clarita

Kern County Superintendent of Schools Office

Los Angeles Unified School District

Oppose Unless Amended

California Special Districts Association

East Bay Housing Organizations

Analysis Prepared by: Dori Ganetsos / H. & C.D. / (916) 319-2085

1. David Garcia, Ian Carlton, Lacy Patterson, and Jacob Strawn, Making It Pencil: The Math Behind Housing Development (2023 Update), Terner Center for Housing Innovation, December 2023, https://ternercenter.berkeley.edu/research-and-policy/making-it-pencil-2023/ ↑

2. IBID. ↑

3. Mark Stivers, Affordable Housing Compares Favorably to Market-Rate Housing From a Cost Perspective, California Housing Partnership, January 2024: https://chpc.net/affordable-housing-compares-favorably-to-market-rate-housing-from-a-cost-perspective/#:~:text=It%20turns%20out%20that%20costs,market%2Drate%20developments%20do%20not. ↑

4. Sarah Mawhorter, David Garcia and Hayley Raetz, It All Adds Up: The Cost of Housing Development Fees in Seven California Cities, Terner Center for Housing Innovation, March

   2018, https://ternercenter.berkeley.edu/research-and-policy/it-all-adds-up-development-fees ↑

5. IBID. ↑

Date of Hearing: June 12, 2024

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Juan Carrillo, Chair

SBPCA Bill Id:SB 937

Author:(Wiener) – As Amended Ver:April 8, 2024

SENATE VOTE: 36-0

SUBJECT: Development projects: permits and other entitlements: fees and charges

SUMMARY: Extends development entitlements for certain housing development projects by two years and places certain restrictions on the fees and charges a local agency may impose on these projects. Specifically, this bill:

1. Extends by 24 months the time frame for any housing entitlement for a priority residential development project that was issued prior to and was in effect on January 1, 2024, and will expire prior to December 31, 2025.
2. Defines “priority residential development project” as residential developments that meet any of the following:
   1. Contain 10 units or less with the exception of manager’s units.
   2. 100% of the units are affordable.
   3. Meet the affordable housing or mixed-income requirements of AB 2011 (Wicks) Chapter 647, Statutes of 2023.
   4. Meet the requirements for streamlined ministerial approval under SB 423 (Wiener) Chapter 778, Statutes of 2023,
   5. Meet the requirements for developments on land owned by institutions of faith or independent institutions of education under SB 4 (Wiener), Chapter 771, Statutes of 2023.
   6. Are entitled to a density bonus.
3. Provides that if a state or local agency extends a housing entitlement between January 1, 2024 and the effective date of this bill, that housing entitlement shall not be extended for an additional 24 months.
4. Defines “housing entitlement” as:
   1. A legislative, adjudicative, administrative, or any other kind of approval, permit, or other entitlement necessary for, or pertaining to, a housing development project issued by a state agency.
   2. An approval, permit, or other entitlement issued by a local agency for a housing development project that is subject to the Permit Streamlining Act.
   3. A ministerial approval, permit, or entitlement by a local agency required as a prerequisite to issuance of a building permit for a housing development project.
   4. A requirement to submit an application for a building permit within a specified period after the effective date of a housing entitlement.
   5. A vested right associated with an approval, permit, or other entitlement.
5. Provides that a “housing entitlement” does not include:
   1. Development agreements.
   2. Approved or conditionally approved subdivision map acts that have already been extended pursuant to SB 9 (Atkins) Chapter 162, Statutes of 2021.
   3. Preliminary applications under the Housing Crisis Act of 2019 (SB 330, Skinner, Chapter 654, Statutes of 2019).
6. Provides that the 24 month extension in this bill shall be tolled during any period that the housing entitlement is the subject of a legal challenge.
7. Provides that nothing in this bill shall preclude a local government from providing an extension in addition to the 24 months specified in this bill.
8. Provides that utility service fees related to connections may be collected at the time an application for service is received, provided those fees do not exceed the costs incurred by the utility provider resulting from the connection activities.
9. Provides that when a local agency requires a property owner or lessee to execute a contract to pay any outstanding fees or charges as a condition of issuing the building permit, the local agency may authorize an officer or employee of the local agency to approve and execute contracts on its behalf. Requires a local agency, prior to execution of a contract, to post a model form of the contract on its website.
10. Clarifies, for priority residential development projects, that if a local agency imposes any fees or charges on the housing development for the construction of public improvements or facilities, then all of the following conditions apply:
    1. Prohibits the local agency from requiring the payment of those fees or charges until the date the certificate of occupancy is issued. Utility service fees related to connections may be collected at the time of application for service is received, provided that those fees do not exceed the costs incurred by the utility provider resulting from the connection activities.
    2. Requires the amount of fees and charges to be the same amount as would have been paid had they been paid prior to the issuance of building permits. Prohibits the local agency from charging interest or other fees on any deferred amount.
    3. Provides that if the housing development includes more than one dwelling, the local agency may determine whether fees and charges shall be paid:
       1. On a pro rata basis for each dwelling when it receives its certificate of occupancy;
       2. On a pro rata basis when a certain percentage of the dwellings have received their certificate of occupancy; or
       3. On a lump sum basis when all the dwellings in the development receive their certificate of occupancy.
          
11. Provide specified limited exceptions to 10), above.
    
12. Provides that if the local agency does not issue certificates of occupancy for these types of housing developments, the final inspection shall serve as the certificate of occupancy.
    
13. Provides that no reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this bill.
    

EXISTING LAW:

1. Prohibits a local agency that imposes any fees or charges on a residential development for the construction of public improvements or facilities from requiring the payment of those fees or charges until the date of the final inspection, or the date the certificate of occupancy is issued, whichever occurs first, with specified exceptions. [Government Code (GOV) § 66007]
   
2. Exempts a local government from the above prohibition if it determines that the fees or charges will be: collected for public improvements or facilities for which an account has been established and funds appropriated, and for which the local government has adopted a proposed construction schedule or plan prior to final inspection or issuance of the certificate of occupancy; or the fees or charges are to reimburse the local government for expenditures previously made. This exception does not apply to units reserved for occupancy by lower income households included in a residential development proposed by a nonprofit housing developer in which at least 49% of the total units are reserved for occupancy by lower income households, as defined. A city or county may require a performance bond or letter of credit to guarantee the payment of the nonprofit housing developer’s fees. (GOV § 66007)
3. Provides that if any fee or charge in 1) is not fully paid prior to the issuance of a building permit, the local agency issuing the building permit may require the property owner, or lessee if the lessee’s interest appears of record, as a condition of issuing a building permit, to execute a contract to pay the fee or charge, or applicable portion, within the time specified in 1). If the fee or charge is prorated, the obligation under the contract shall be similarly prorated. (GOV § 66007)
   
4. Allows a local agency to defer the collection of one or more fees up to the close of escrow. (GOV § 66007)

FISCAL EFFECT: This bill is keyed fiscal and contains a state mandated local program.

COMMENTS:

1. Bill Summary. This bill extends the expiration of an entitlement by 24 months for a priority residential development projects that was issued an entitlement prior to and was in effect on January 1, 2024 and who’s entitlement will expire prior to December 31, 2025. “Priority residential development projects” are defined as residential developments that meet any of the following:
   1. Contain 10 units or less with the exception of manager’s units.
      
   2. 100% of the units are affordable.
      
   3. Meet the affordable housing or mixed-income requirements of AB 2011 (Wicks) Chapter 647, Statutes of 2023.
      
   4. Meet the requirements for streamlined ministerial approval under SB 423 (Wiener) Chapter 778, Statutes of 2023,
      
   5. Meet the requirements for developments on land owned by institutions of faith or independent institutions of education under SB 4 (Wiener), Chapter 771, Statutes of 2023.
      
   6. Are entitled to a density bonus.

This extension does not apply to projects that have already received an extension of at least 24 months on or after January 1, 2024, but before the enactment of the bill.

The bill also defers payment of development fees imposed on priority residential development projects to the date of final inspection or the issuance of a certificate of occupancy. Housing Action Coalition, California Housing Consortium, and California YIMBY are cosponsors of this bill.

1. Author’s Statement. According to the author, “Senate Bill 937 seeks to minimize the impact of market fluctuations and high interest rates on housing production by delaying development fees and providing additional time post-entitlement.
   
   “Many cities have deferred the collection of development fees during periods of economic hardship to prevent housing production from halting. Additionally, economic volatility can cause some projects to die because their entitlements expire before the developer can raise the money to complete the project. Cities grant entitlements to developers as the last step before construction begins, but they are typically only valid for a limited period before expiring. With today’s high interest rates and rising costs driven by COVID-related inflation, developers are facing a challenge to make projects pencil.
   
   “SB 937 helps address these concerns by delaying the payment of development fees imposed by a local government until the certificate of occupancy is issued. Local governments may not charge interest rates on any deferred fees. Further, SB 937 provides developers with much-needed wiggle room by extending housing entitlements issued prior to Jan. 1, 2024 and set to expire on or before Dec. 31, 2025 by 18 months. These provisions will ensure market conditions do not dampen California’s work towards addressing our housing crisis.”
   
2. Local Government Police Power. The California Constitution allows cities and counties to “make and enforce within its limits, all local, police, sanitary and other ordinances and regulations not in conflict with general laws.” It is from this fundamental power (commonly called the police power) that cities and counties derive their authority to regulate behavior to preserve the health, safety, and welfare of the public—including land use authority. Local governments use their police power to enact zoning ordinances that shape development, such as setting maximum heights and densities for housing units, minimum numbers of required parking spaces, setbacks to preserve privacy, and lot coverage ratios to increase open space, among others. These ordinances can also include conditions on development to address community impacts or other particular site-specific considerations. Local governments have broad authority to define the specific approval processes needed to satisfy these considerations, including the permits the developer must obtain.
   
3. Local Government Finance After Proposition 13. A series of propositions have drastically cut into local revenue sources, requiring local governments to look elsewhere to fund services that the public demands. First, Proposition 13 (1978) capped property tax rates at 1% of assessed value (which only changes upon new construction or when ownership changes) and required 2/3 voter approval for special taxes; as a result local governments turned to general taxes to avoid the higher voter threshold. When Proposition 62 (1986) required majority voter approval of general taxes, local agencies imposed assessments that were more closely tied to the benefit that an individual property owner receives. Subsequently, Proposition 218 (1996) required voter approval of parcel taxes, assessments, and property-related fees.
   
   In response to the reduction in property tax revenues from Proposition 13 and the difficulty of raising other taxes, local agencies have turned to other sources of funds for general operations, including sales taxes and transient occupancy taxes, also known as hotel taxes. Commercial enterprises generate sales tax and hotel tax revenue, and simultaneously pay property taxes and demand relatively few services (such as public safety or parks). Residential developments, by contrast, do not directly generate sales or hotel tax revenue, and the new residents demand a wider variety of more intensive services. As a result, cities and counties face a disincentive to approve housing because of the higher net fiscal cost of residential development, particularly if they have the option to instead permit commercial development that may produce net fiscal benefits, also known as the fiscalization of land use.
   
   Since they cannot impose broad-based taxes without great difficulty, cities and counties follow a simple principle: new developments should pay for the impacts they have on the community and the burden they impose on public services.
   
4. Mitigation Fee Act. When approving development projects, counties and cities can require the applicants to mitigate the project's effects by paying fees—known as mitigation fees, impact fees, or developer fees. The California courts have upheld impact fees for sidewalks, parks, school construction, and many other public purposes.
   
   When establishing, increasing, or imposing a fee as a condition of approving a development project, the Mitigation Fee Act requires local officials to:
   
   1. Identify the fee’s purpose.
   2. Identify the fee’s use, including the public facilities to be financed.
   3. Determine a reasonable relationship between the fee’s use and the development.
   4. Determine a reasonable relationship between the public facility’s need and the development.

When imposing a fee as a condition of approving a development project, the Mitigation Fee Act also requires local officials to determine a reasonable relationship between the fee’s amount and the cost of the public facility. In its 1987 Nollan decision, the U.S. Supreme Court said there must be an “essential nexus” between a project's impacts and the conditions for approval. In the 1994 Dolan decision, the U.S. Supreme Court said that conditions on development must have a "rough proportionality" to a project's impacts.

In the 1996 Ehrlich decision, the California Supreme Court distinguished between “legislatively enacted” conditions that apply to all projects and “ad hoc” conditions imposed on a project-by- project basis. Ehrlich applied the “essential nexus” test from Nollan and the “rough proportionality” test from Dolan to “ad hoc’ conditions. The Court did not apply the Nollan and Dolan tests to the conditions that were “legislatively enacted.” In other words, local officials have generally faced greater scrutiny when they impose conditions on a project-by-project basis. As a result of these decisions and the Mitigation Fee Act, local agencies have conducted nexus studies to ensure any proposed impact fees meet these legal tests for most impact fees. Other requirements in the Mitigation Fee Act ensure that impact fees are appropriately levied and spent.

On April 12 of this year, the United States Supreme Court decided Sheetz v. County of El Dorado, California. The case involved the takings clause of the Fifth Amendment to the U.S. Constitution. An El Dorado County resident challenged the county’s legislatively enacted traffic impact mitigation fee, arguing the county should only charge him based on the impact associated with his specific parcel. The main question was whether or not the same standards of “essential nexus” and “rough proportionality” apply to legislatively enacted fees as they do to ad-hoc fees.

In the Sheetz decision, the Court stated, “A legislative exception to the Nollan/Dolan test ‘conflicts with the rest of our takings jurisprudence,’ which does not otherwise distinguish between legislation and other official acts. Knick v. Township of Scott, 588 U. S. 180, 185 (2019).” The Court also proclaimed that, “...as we have explained, a legis­lative exception to the ordinary takings rules finds no sup­port in constitutional text, history, or precedent. We do not address the parties’ other disputes over the va­lidity of the traffic impact fee, including whether a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development. The California Court of Appeal did not consider this point—or any of the parties’ other nuanced arguments—because it proceeded from the erroneous premise that legislative permit condi­tions are categorically exempt from the requirements of Nollan and Dolan. Whether the parties’ other arguments are preserved and how they bear on Sheetz’s legal challenge are for the state courts to consider in the first instance.”

In addition, Justice Kavanaugh filed a concurring opinion, in which Justices Kagan and Jackson joined saying that, “I join the Court’s opinion. I write separately to underscore that the Court has not previously decided—and today explicitly declines to decide—whether ‘a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development.’ Ante, at 10–11. Importantly, therefore, today’s decision does not address or prohibit the common government practice of imposing permit conditions, such as impact fees, on new developments through reasonable formulas or schedules that assess the impact of classes of development rather than the impact of specific parcels of property. Moreover, as is apparent from the fact that today’s decision expressly leaves the question open, no prior decision of this Court has addressed or prohibited that longstanding government practice."

1. Impact Fee Collection. Generally, cities and counties cannot collect impact fees before they conduct the final inspection or issue a certificate of occupancy, whichever occurs first. Utilities can collect impact fees at the time the utility receives an application for service, which can happen before a final inspection. For residential developments with more than one dwelling, the local agency can determine whether developers pay fees on a pro rata or on a lump sum basis when the first dwelling in the development receives its final inspection or certificate of occupancy, whichever occurs first.
   
   However, current law allows a local agency to require payment earlier than described above if it has determined that the fees or charges will be collected for public improvement of facilities for which an account has been established. This requirement does not apply to a nonprofit housing developer that reserves at least 49% of units for lower income households. Cities and counties can require performance bonds or letters of credit to guarantee these specific payments.
   
   If the developer has not fully paid the impact fees before the local agency has issued a building permit for construction of any portion of the residential development, the local agency can require the developer, as a condition of receiving the building permit, to enter into a contract to pay the fees, secured by a lien on the property. Additionally, the local agency can require the developer to provide notification of the opening of any escrow for the sale of the property, and disclose in the escrow instructions that the fees must be paid before disbursing proceeds to the seller. The local agency can defer collection of one or more fees up to the close of escrow.
   
   This bill prohibits the collection of fees prior to the issuance of a certificate of occupancy or the final inspection for priority residential developments projects, as defined.
   
2. Entitlements and Extensions. In general, constructing a housing development project requires local government approval at multiple stages; this approval process is often referred to as the entitlement process. An approval is generally considered an entitlement when it locks in the regulatory standards that a local government or state agency can apply to a project. Entitlements are powerful documents as they provide certainty to developers, which can help them secure financing for a project. However, entitlements also constrain the ability of local governments and state agencies to adjust for new conditions. Additionally, when an issued entitlement is outstanding, it alters the ability of the local government or state agency to approve other projects that could potentially be impacted by the pending project. Therefore, various entitlements are subject to expiration, although many may be extended at the discretion of the local government or state agency.

The Legislature has occasionally sought to assist developers by extending certain entitlements. For example, AB 1561 (C. Garcia and Grayson) Chapter 195, Statutes of 2020 included a provision for an 18-month extension for planning level and pre-building permit entitlements that were issued prior to the COVID State of Emergency declared by the Governor on March 4, 2020 and were set to expire prior to December 31, 2021. This bill, in recognition of factors such as rising interest rates, changes in insurance markets, and labor and construction costs, provides a 24-month extension for entitlements for priority residential development projects, as defined.

1. Policy Considerations. The Committee may wish to consider the following:
   1. Fee Deferral. While deferral of fees may help a project’s financing options and long term feasibility, local governments have expressed concerns that they will be on the line for providing infrastructure to a new development that may or may or may not get built in a timely fashion, if at all. Past legislation has allowed local governments to encourage construction of certain projects within a specified period of time to take advantage of ordinances, policies, or standards a project is locked into. For example, in SB 330 (Skinner) Chapter 654, Statutes of 2019 the Legislature allowed a local government to impose current ordinance, policies, and standards on a housing project if the project has not begun construction within two and one-half years of the date of final approval. The Committee may wish to consider the impact of granting deferrals of impact fees on local governments in providing services and critical infrastructure to the communities they serve.
   2. The Interwebs. Local public agencies can be huge and compete with other states in the size of their budgets and constituency, or they are small but mighty and have two part-time employees. To this effect, not all local agencies have a website. This bill requires a local agency to post a model contract on its website prior to entering into a contract if impacts fees are not paid prior to the issuance of a building permit. The Committee may wish to consider if exempting local agencies that do not have a website may provide relief to smaller agencies while preserving the policy goals of the bill.
2. Committee Amendments. In order to address the policy considerations identified above, the committee may wish to consider the following amendments:
   1. Require the developer of a priority residential development project to begin construction of the project within five years of the date of the building permit being issued. If the developer does not begin construction within five years, the fee deferral expires.
   2. Amend paragraph (5) of subdivision (d) of Section 2 as follows “Prior to requiring execution of a contract under this subdivision, the local agency shall post a model form of contract on its internet website, if the agency has a website.”
3. Related Legislation. AB 1820 (Schiavo) establishes a process through which development proponents can request preliminary project fee and exaction estimates when submitting a preliminary application, and receive a final list of all fees and exactions related to the project after final approval, within a specified timeframe. This bill is pending in the Senate Local Government Committee.
   
   AB 2729 (Joe Patterson) prohibits a local agency from requiring payment of fees or charges on a residential development before the date of final inspection or the issuances of a certificate of occupancy, whichever occurs first, except under specified conditions. This bill is pending in the Senate Local Government Committee.
4. Previous Legislation. AB 434 (Grayson), Chapter 740, Statutes of 2023 added specified housing laws to the list of laws that the Department of Housing and Community Development is required to enforce.
   
   AB 2234 (Rivas), Chapter 651, Statutes of 2022 established time limits and procedures for approval of, and requires online permitting of, post-entitlement permits.
   
   AB 1561 (C. Garcia and Grayson), Chapter 195, Statues of 2020 provides an 18-month entitlement extension for specified approvals of housing development projects and includes a provision extending, by 18 months, the time frame for the expiration, effectuation, or utilization of a housing entitlement that was issued prior to, and was in effect on, March 4, 2020, and was set to expire prior to December 31, 2021.
5. Arguments in Support. California YIMBY, California Housing Consortium, and Housing Action Coalition, sponsors of this bill, write, “SB 937 does not eliminate fees; it simply changes when the fees are collected. SB 937 seeks to strike a balance between meeting the needs of local governments and providing the flexibility developers require to ensure that housing units are built. While impact fees are an expected part of construction, they are a burden and can be a barrier to new development. Fees range significantly between jurisdictions, with Los Angeles reporting a multifamily development fee of $12,000 per unit, while Fremont reports $75,0001. Deferring fees can result in less reliance on pre-development funding, which is often more expensive or difficult to secure.
   
   “When impact fees are collected at the early stages of development, such as when building permits are issued, the actual cost to the developer can exceed the cost of the fee. The developer will often borrow money to pay for impact and entitlement fees. A paper by UCLA’s Lewis Center looking at fee deferrals in Los Angeles found that ‘assessing fees at earlier stages can do real harm by deterring housing production.’ It further goes on to say that ‘Fee deferral programs can efficiently reduce costs and increase the viability of housing production, and they can do so without asking local governments to forfeit any revenue.’
   
   “Additionally, SB 937 provides an entitlement extension to development projects that were negatively impacted by COVID-related inflation and are at risk of not being built. To curb growing inflation, the Federal Reserve has regularly raised interest rates over the past two years. While these increases helped stifle rapidly growing inflation, loans for acquiring properties or funding development projects became too expensive and crippled the viability of many projects. As interest rates begin to lower, the financing for some projects might again be possible, but these projects will not be built unless an entitlement extension can be provided. SB 937 provides a solution to this problem by extending housing entitlements issued prior to January 1, 2024, and set to expire on or before December 31, 2025, by 24 months. This extension would only be provided to developments that have a high percentage of affordable units.”
   
6. Arguments in Opposition. The California Special Districts Association, the California Fire Chiefs Association, and the Fire Districts Association of California have an oppose unless amended position and write, “Development related fees pay for the costs to install infrastructure necessary to build new homes and other development in livable, equitable, and thriving communities. These fees pay for critical services such as water, sewer, fire protection, parks and open space, flood protection, libraries, and other essential needs. Specifically, these fees and the infrastructure they fund make new housing and economic development possible.
   
   “SB 937 would, among other things, for certain developments, defer development impact fees until the certificate of occupancy or its equivalent, locks in those fees at prior to the issuance of a building permit, and prohibit the charging on interest on those deferred fees.
   
   “While we are grateful for the Author’s efforts to dialogue and find compromise, having made several substantive amendments to date, we find that the measure would still benefit from several changes to mitigate the challenges it presents to local agencies and their efforts to provide essential services and infrastructure.
   
   “Some amendments that have been discussed broadly include the following:
   • Narrow the scopes and types of developments that fall under the category of ‘priority residential development project’, such as the 10 unit or fewer provision,
   • To prevent long running projects from making it too risky or expensive for local agencies to execute their plans to provide essential infrastructure and services to a new development:
     • Clarify that fees may be indexed for inflation at the point of the fee ‘lock-in’, and
     • A deadline on the development project to break ground to benefit from the measure.
   • Recognize the special district hardship exception to the website requirement as applied to the model contract found mandate in the bill found per GC 53087.8”
7. Double-Referral. This bill is double-referred to the Assembly Committee on Housing and Community Development.

REGISTERED SUPPORT / OPPOSITION:

Support
21st Century Alliance
Apartment Association of Greater Los Angeles
California Apartment Association
California Hispanic Chambers of Commerce
California Housing Consortium
California Rental Housing Association
California Yimby
East Bay for Everyone
East Bay Yimby
Eastside Housing for All
Elk Grove; City of
Fremont for Everyone
Grow the Richmond
House Sacramento
Housing Action Coalition
Housing Trust Silicon Valley
How to Adu
Livable Communities Initiative
MidPen Housing
Mountain View Yimby
Napa-solano for Everyone
Northern Neighbors
Peninsula for Everyone
People for Housing - Orange County
Progress Noe Valley
San Francisco Yimby
San Luis Obispo Yimby
Santa Cruz Yimby
Santa Rosa Yimby
South Bay Yimby
Southside Forward
Streets for People
Urban Environmentalists
Valley Industry Commerce Association
Ventura County Yimby
Yimby Slo

Support If Amended
Field stead and Company, INC.
Habitat for Humanity California

Housing Leadership Council
Silicon Valley Leadership Group
Spur
Yimby Action

Oppose

City of Santa Clarita
Kern County Superintendent of Schools Office
Los Angeles Unified School District
San Marcos, City of

South Bay Cities Council of Governments

Thousand Oaks; City of

Oppose Unless Amended

California Building Industry Association
California Special Districts Association

California Fire Chiefs Association
East Bay Housing Organizations

Fire Districts Association of California

Analysis Prepared by: Linda Rios / L. GOV. / (916) 319-3958

 THIRD READING  

Bill No: SB 937

Author: Wiener (D), et al.

Amended: 4/8/24

Vote: 21

SENATE LOCAL GOVERNMENT COMMITTEE: 6-0, 4/3/24

AYES: Durazo, Seyarto, Dahle, Skinner, Wahab, Wiener

NO VOTE RECORDED: Glazer

SENATE HOUSING COMMITTEE: 9-0, 4/16/24

AYES: Skinner, Blakespear, Caballero, Cortese, Menjivar, Padilla, Seyarto, Umberg, Wahab

NO VOTE RECORDED: Ochoa Bogh

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT: Development projects: permits and other entitlements: fees and charges

SOURCE: California YIMBY

Housing Action Coalition

DIGEST:

This bill makes various changes to the process for local agencies to collect development impact fees, and extends development entitlements.

ANALYSIS:

Existing law:

1. Allows local governments to require applicants for development projects to pay fees to mitigate the project’s effects, known as mitigation or development impact fees.
2. Requires, under the Mitigation Fee Act, local officials that are establishing, increasing, or imposing a fee as a condition of approving a development project to:
   1. Identify the fee's purpose.
   2. Identify the fee's use, including the public facilities to be financed.
   3. Determine a reasonable relationship between the fee's use and the development.
   4. Determine a reasonable relationship between the public facility's need and the development.
   5. Determine a reasonable relationship between the fee's amount and the cost of the public facility.
   6. Hold at least one open and public meeting prior to levying a new fee or increasing an existing one.
   7. If they decide to adopt capital improvement plans, indicate the approximate location, size, time of availability, and estimates of cost for all facilities or improvements to be financed with the fees.
   8. Deposit and spend the fees within five years of collecting them.
   9. Refund fees or make specific findings on when and how the fees will be spent for construction, if the fees aren’t spent within five years of collection.
3. Requires local agencies to deposit mitigation fees to fund a capital improvement associated with a development in a separate account or fund.
4. Requires local agencies that impose mitigation fees to produce an annual report within 180 days of the end of the fiscal year that includes specified information.
5. Requires a city, county, or special district that has an internet website to post and update on their websites specified information, including a current schedule of housing development project costs, zoning ordinances and development standards, annual impact fee reports, and an archive of specified impact fee nexus studies.
6. Requires local agencies to conduct and adopt a nexus study prior to the adoption of an impact fee, and specified standards and practices.
7. Provides that cities and counties cannot collect impact fees before they conduct the final inspection or issue a certificate of occupancy, whichever occurs first. However, utilities can collect impact fees at the time the utility receives an application for service, which can happen before a final inspection.
8. Allows the local agency, for residential developments with more than one dwelling, to determine whether developers pay fees on a pro rata or on a lump sum basis when the first dwelling in the development receives its final inspection or certificate of occupancy, whichever occurs first.
9. Allows local agencies to require payment earlier than described above if it has adopted a proposed construction schedule or to reimburse the local agency for expenditures already made, so long as the project does not come from a nonprofit developer that reserves at least 49% of units for lower income households. Cities and counties can require performance bonds or letters of credits to guarantee these specific payments.
10. Provides that if the developer has not fully paid the impact fees before the local agency has issued a building permit for construction of any portion of the residential development, the local agency can require the developer, as a condition of receiving the building permit, to enter into a contract to pay the fees, secured by a lien on the property.
11. Allows the local agency to require the developer to provide notification of the opening of any escrow for the sale of the property, and disclose in the escrow instructions that the fees must be paid before disbursing proceeds to the seller. The local agency can defer collection of one or more fees up to the close of escrow.

This bill:

1. Provides, for priority residential development projects, that if a local agency imposes any fees or charges on the housing development for the construction of public improvements or facilities, then all of the following conditions apply:
   1. Prohibits the local agency from requiring the payment of those fees or charges until the date the certificate of occupancy is issued.
   2. Requires the amount of fees and charges to be the same amount as would have been paid had they been paid prior to the issuance of building permits. Prohibits the local agency from charging interest or other fees on any deferred amount.
   3. Provides that if the housing development includes more than one dwelling, the local agency may determine whether fees and charges shall be paid:
      1. On a pro rata basis for each dwelling when it receives its certificate of occupancy;
      2. On a pro rata basis when a certain percentage of the dwellings have received their certificate of occupancy; or
      3. On a lump sum basis when all the dwellings in the development receive their certificate of occupancy.
2. Provides that if the local agency does not issue certificates of occupancy for these types of housing developments, the final inspection shall serve as the certificate of occupancy.
3. Provides that utility service fees related to connections may be collected at the time an application for service is received, provided those fees do not exceed the costs incurred by the utility provider resulting from the connection activities.
4. Provides that when a local agency requires a property owner or lessee to execute a contract to pay any outstanding fees or charges as a condition of issuing the building permit, the local agency may authorize an officer or employee of the local agency to approve and execute contracts on its behalf. Requires a local agency, prior to execution of a contract, to post a model form of the contract on its website.
5. Defines “priority residential development project” as specified streamlined and affordable housing projects, as well as all projects ten units or less.
6. Extends by 24 months the time frame for any housing entitlement for a priority residential development project that was issued to and was in effect on January 1, 2024, and will expire prior to December 31, 2025.
   
7. Provides that if a state or local agency extends a housing entitlement between January 1, 2024 and the effective date of this bill, that housing entitlement shall not be extended for an additional 24 months.
8. Defines “housing entitlement” as:
   1. A legislative, adjudicative, administrative, or any other kind of approval, permit, or other entitlement necessary for, or pertaining to, a housing development project issued by a state agency.
   2. An approval, permit, or other entitlement issued by a local agency for a housing development project that is subject to the Permit Streamlining Act.
   3. A ministerial approval, permit, or entitlement by a local agency required as a prerequisite to issuance of a building permit for a housing development project.
   4. A requirement to submit an application for a building permit within a specified period after the effective date of a housing entitlement.
   5. A vested right associated with an approval, permit, or other entitlement.
9. Provides that a “housing entitlement” does not include:
   1. Development agreements.
   2. Approved or conditionally approved subdivision map acts that have already been extended. (SB 9, Atkins, Chapter 162, Statutes of 2021)
   3. Preliminary applications under the Housing Crisis Act of 2019. (SB 330, Skinner, Chapter 654, Statutes of 2019)
10. Provides that the 24-month extension in this bill shall be tolled during any period that the housing entitlement is the subject of a legal challenge.
11. Provides that nothing in this bill shall preclude a local government from providing an extension in addition to the 24 months specified in this bill.

Background

1. Impact fees. Local governments can charge a variety of fees to a development. These fees, commonly known as impact fees or mitigation fees, go toward infrastructure development (such as adding lanes to roads or supporting additional traffic) or other public benefits (such as new parks, schools, or affordable housing). In response to the reduction in property tax revenues from Proposition 13 and the difficulty of raising taxes, local agencies have turned to other sources of funds for general operations, including sales taxes and transient occupancy taxes, also known as hotel taxes. Commercial enterprises generate sales tax and hotel tax revenue, and simultaneously pay property taxes and demand relatively few services (such as public safety or parks). Residential developments, by contrast, do not directly generate sales or hotel tax revenue, and the new residents demand a wider variety of more intensive services. As a result, cities and counties face a disincentive to approve housing because of the higher net fiscal cost of residential development, particularly if they have the option to instead permit commercial development that may produce net fiscal benefits, also known as the fiscalization of land use.
2. Housing entitlements. In general, constructing a housing development project requires local government approval at multiple stages; this approval process is often referred to as the entitlement process. An approval is generally considered an entitlement when it locks in the regulatory standards that a local government or state agency can apply to a project. Entitlements are powerful documents as they provide certainty to developers, which can help them secure financing for a project. However, entitlements also constrain the ability of local governments and state agencies to adjust for new conditions. Additionally, when an issued entitlement is outstanding, it alters the ability of the local government or state agency to approve other projects that could potentially be impacted by the pending project. Therefore, various entitlements are subject to expiration, although many may be extended at the discretion of the local government or state agency.

Comments

1. Purpose of the bill. According to the author, “Senate Bill 937 seeks to minimize the impact of market fluctuations and high interest rates on housing production by delaying development fees and providing additional time post-entitlement. Many cities have deferred the collection of development fees during periods of economic hardship to prevent housing production from halting. Additionally, economic volatility can cause some projects to die because their entitlements expire before the developer can raise the money to complete the project. Cities grant entitlements to developers as the last step before construction begins, but they are typically only valid for a limited period before expiring. With today’s high interest rates and rising costs driven by COVID-related inflation, developers are facing a challenge to make projects pencil. SB 937 helps address these concerns by delaying the payment of development fees imposed by a local government until the certificate of occupancy is issued. Local governments may not charge interest rates on any deferred fees. Further, SB 937 provides developers with much-needed wiggle room by extending housing entitlements issued prior to Jan. 1, 2024 and set to expire on or before Dec. 31, 2025 by 18 months. These provisions will ensure market conditions do not dampen California’s work towards addressing our housing crisis.”
2. Home rule. Local agencies can already develop their own fee deferral programs. For example, the City of Sacramento implemented a policy in its 2016 General Plan update to allow affordable housing developers to defer fees until certificate of occupancy to help offset affordable housing development costs. This bill makes deferrals until certificate of occupancy a statewide policy for any priority residential development project. Should decisions about impact fee deferral programs, and the projects they apply to, should be left at the local level?
3. Don’t forget about me. In addition to changes on impact fee collection, this bill also requires local agencies to extend development entitlements by 24 months for priority residential development projects. The types of entitlements this bill covers is broad, including approvals, permits, or entitlements. Time limits on entitlements ensure that local conditions have not changed significantly since the project was approved. These time limits also give developers an incentive to begin construction on their projects for fear of losing the effort they put into securing that entitlement. This bill takes away the ability for local agencies to determine whether all entitlements should be extended in the same manner, and may actually delay some housing projects as developers wait for housing prices to increase, interest rates to lower, or other changes in the economics of housing construction. On the other hand, extending development entitlements grant developers more time to build projects that may have been delayed because of financing challenges or other issues. This could make it easier for some projects to pencil out, which can be particularly challenging for affordable housing projects.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT: (Verified 4/30/24)

California Yimby (co-source)
Housing Action Coalition (co-source)
American Council of Engineering Companies of California
Apartment Association of Greater Los Angeles
Bay Area Council
Calchamber
California Apartment Association
California Building Industry Association
California Community Builders
California Hispanic Chambers of Commerce
California Housing Consortium
California Rental Housing Association
Central City Association
East Bay for Everyone
East Bay Yimby
Fieldstead and Company, INC.
Fremont for Everyone
Generation Housing
Grow the Richmond
Habitat for Humanity California
Habitat for Humanity Greater San Francisco
House Sacramento
Housing Leadership Council of San Mateo County
Housing Trust Silicon Valley
How to Adu
Leadingage California
Livable Communities Initiative
Midpen Housing
Mountain View Yimby
Napa-Solano for Everyone
Northern Neighbors
Peninsula for Everyone
People for Housing - Orange County
Progress Noe Valley
Rand Paster Nelson
San Francisco Yimby
San Luis Obispo Yimby
Santa Cruz Yimby
Santa Rosa Yimby
Silicon Valley Leadership Group
South Bay Yimby
Southside Forward
Spur
Streets for People
Urban Environmentalists
Valley Industry and Commerce Association
Ventura County Yimby
Yimby Action

OPPOSITION: (Verified 4/30/24)

California Coalition for Adequate School Housing
California Special Districts Association
California State Association of Counties
City of Belmont
City of La Verne
City of San Marcos
East Bay Housing Organizations
Kern County Superintendent of Schools Office
League of California Cities
Urban Counties of California

Prepared by: Jonathan Peterson / L. GOV. / (916) 651-4119

5/1/24 11:26:25

**** END ****

 THIRD READING  

Bill No: SB 937

Author: Wiener (D), et al.

Amended: 4/8/24

Vote: 21

SENATE LOCAL GOVERNMENT COMMITTEE: 6-0, 4/3/24

AYES: Durazo, Seyarto, Dahle, Skinner, Wahab, Wiener

NO VOTE RECORDED: Glazer

SENATE HOUSING COMMITTEE: 9-0, 4/16/24

AYES: Skinner, Blakespear, Caballero, Cortese, Menjivar, Padilla, Seyarto, Umberg, Wahab

NO VOTE RECORDED: Ochoa Bogh

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT: Development projects: permits and other entitlements: fees and charges

SOURCE: California YIMBY

Housing Action Coalition

DIGEST:

This bill makes various changes to the process for local agencies to collect development impact fees, and extends development entitlements.

ANALYSIS:

Existing law:

1. Allows local governments to require applicants for development projects to pay fees to mitigate the project’s effects, known as mitigation or development impact fees.
2. Requires, under the Mitigation Fee Act, local officials that are establishing, increasing, or imposing a fee as a condition of approving a development project to:
   1. Identify the fee's purpose.
   2. Identify the fee's use, including the public facilities to be financed.
   3. Determine a reasonable relationship between the fee's use and the development.
   4. Determine a reasonable relationship between the public facility's need and the development.
   5. Determine a reasonable relationship between the fee's amount and the cost of the public facility.
   6. Hold at least one open and public meeting prior to levying a new fee or increasing an existing one.
   7. If they decide to adopt capital improvement plans, indicate the approximate location, size, time of availability, and estimates of cost for all facilities or improvements to be financed with the fees.
   8. Deposit and spend the fees within five years of collecting them.
   9. Refund fees or make specific findings on when and how the fees will be spent for construction, if the fees aren’t spent within five years of collection.
3. Requires local agencies to deposit mitigation fees to fund a capital improvement associated with a development in a separate account or fund.
4. Requires local agencies that impose mitigation fees to produce an annual report within 180 days of the end of the fiscal year that includes specified information.
5. Requires a city, county, or special district that has an internet website to post and update on their websites specified information, including a current schedule of housing development project costs, zoning ordinances and development standards, annual impact fee reports, and an archive of specified impact fee nexus studies.
6. Requires local agencies to conduct and adopt a nexus study prior to the adoption of an impact fee, and specified standards and practices.
7. Provides that cities and counties cannot collect impact fees before they conduct the final inspection or issue a certificate of occupancy, whichever occurs first. However, utilities can collect impact fees at the time the utility receives an application for service, which can happen before a final inspection.
8. Allows the local agency, for residential developments with more than one dwelling, to determine whether developers pay fees on a pro rata or on a lump sum basis when the first dwelling in the development receives its final inspection or certificate of occupancy, whichever occurs first.
9. Allows local agencies to require payment earlier than described above if it has adopted a proposed construction schedule or to reimburse the local agency for expenditures already made, so long as the project does not come from a nonprofit developer that reserves at least 49% of units for lower income households. Cities and counties can require performance bonds or letters of credits to guarantee these specific payments.
10. Provides that if the developer has not fully paid the impact fees before the local agency has issued a building permit for construction of any portion of the residential development, the local agency can require the developer, as a condition of receiving the building permit, to enter into a contract to pay the fees, secured by a lien on the property.
11. Allows the local agency to require the developer to provide notification of the opening of any escrow for the sale of the property, and disclose in the escrow instructions that the fees must be paid before disbursing proceeds to the seller. The local agency can defer collection of one or more fees up to the close of escrow.

This bill:

1. Provides, for priority residential development projects, that if a local agency imposes any fees or charges on the housing development for the construction of public improvements or facilities, then all of the following conditions apply:
   1. Prohibits the local agency from requiring the payment of those fees or charges until the date the certificate of occupancy is issued.
   2. Requires the amount of fees and charges to be the same amount as would have been paid had they been paid prior to the issuance of building permits. Prohibits the local agency from charging interest or other fees on any deferred amount.
   3. Provides that if the housing development includes more than one dwelling, the local agency may determine whether fees and charges shall be paid:
      1. On a pro rata basis for each dwelling when it receives its certificate of occupancy;
      2. On a pro rata basis when a certain percentage of the dwellings have received their certificate of occupancy; or
      3. On a lump sum basis when all the dwellings in the development receive their certificate of occupancy.
2. Provides that if the local agency does not issue certificates of occupancy for these types of housing developments, the final inspection shall serve as the certificate of occupancy.
3. Provides that utility service fees related to connections may be collected at the time an application for service is received, provided those fees do not exceed the costs incurred by the utility provider resulting from the connection activities.
4. Provides that when a local agency requires a property owner or lessee to execute a contract to pay any outstanding fees or charges as a condition of issuing the building permit, the local agency may authorize an officer or employee of the local agency to approve and execute contracts on its behalf. Requires a local agency, prior to execution of a contract, to post a model form of the contract on its website.
5. Defines “priority residential development project” as specified streamlined and affordable housing projects, as well as all projects ten units or less.
6. Extends by 24 months the time frame for any housing entitlement for a priority residential development project that was issued to and was in effect on January 1, 2024, and will expire prior to December 31, 2025.
   
7. Provides that if a state or local agency extends a housing entitlement between January 1, 2024 and the effective date of this bill, that housing entitlement shall not be extended for an additional 24 months.
8. Defines “housing entitlement” as:
   1. A legislative, adjudicative, administrative, or any other kind of approval, permit, or other entitlement necessary for, or pertaining to, a housing development project issued by a state agency.
   2. An approval, permit, or other entitlement issued by a local agency for a housing development project that is subject to the Permit Streamlining Act.
   3. A ministerial approval, permit, or entitlement by a local agency required as a prerequisite to issuance of a building permit for a housing development project.
   4. A requirement to submit an application for a building permit within a specified period after the effective date of a housing entitlement.
   5. A vested right associated with an approval, permit, or other entitlement.
9. Provides that a “housing entitlement” does not include:
   1. Development agreements.
   2. Approved or conditionally approved subdivision map acts that have already been extended. (SB 9, Atkins, Chapter 162, Statutes of 2021)
   3. Preliminary applications under the Housing Crisis Act of 2019. (SB 330, Skinner, Chapter 654, Statutes of 2019)
10. Provides that the 24-month extension in this bill shall be tolled during any period that the housing entitlement is the subject of a legal challenge.
11. Provides that nothing in this bill shall preclude a local government from providing an extension in addition to the 24 months specified in this bill.

Background

1. Impact fees. Local governments can charge a variety of fees to a development. These fees, commonly known as impact fees or mitigation fees, go toward infrastructure development (such as adding lanes to roads or supporting additional traffic) or other public benefits (such as new parks, schools, or affordable housing). In response to the reduction in property tax revenues from Proposition 13 and the difficulty of raising taxes, local agencies have turned to other sources of funds for general operations, including sales taxes and transient occupancy taxes, also known as hotel taxes. Commercial enterprises generate sales tax and hotel tax revenue, and simultaneously pay property taxes and demand relatively few services (such as public safety or parks). Residential developments, by contrast, do not directly generate sales or hotel tax revenue, and the new residents demand a wider variety of more intensive services. As a result, cities and counties face a disincentive to approve housing because of the higher net fiscal cost of residential development, particularly if they have the option to instead permit commercial development that may produce net fiscal benefits, also known as the fiscalization of land use.
2. Housing entitlements. In general, constructing a housing development project requires local government approval at multiple stages; this approval process is often referred to as the entitlement process. An approval is generally considered an entitlement when it locks in the regulatory standards that a local government or state agency can apply to a project. Entitlements are powerful documents as they provide certainty to developers, which can help them secure financing for a project. However, entitlements also constrain the ability of local governments and state agencies to adjust for new conditions. Additionally, when an issued entitlement is outstanding, it alters the ability of the local government or state agency to approve other projects that could potentially be impacted by the pending project. Therefore, various entitlements are subject to expiration, although many may be extended at the discretion of the local government or state agency.

Comments

1. Purpose of the bill. According to the author, “Senate Bill 937 seeks to minimize the impact of market fluctuations and high interest rates on housing production by delaying development fees and providing additional time post-entitlement. Many cities have deferred the collection of development fees during periods of economic hardship to prevent housing production from halting. Additionally, economic volatility can cause some projects to die because their entitlements expire before the developer can raise the money to complete the project. Cities grant entitlements to developers as the last step before construction begins, but they are typically only valid for a limited period before expiring. With today’s high interest rates and rising costs driven by COVID-related inflation, developers are facing a challenge to make projects pencil. SB 937 helps address these concerns by delaying the payment of development fees imposed by a local government until the certificate of occupancy is issued. Local governments may not charge interest rates on any deferred fees. Further, SB 937 provides developers with much-needed wiggle room by extending housing entitlements issued prior to Jan. 1, 2024 and set to expire on or before Dec. 31, 2025 by 18 months. These provisions will ensure market conditions do not dampen California’s work towards addressing our housing crisis.”
2. Home rule. Local agencies can already develop their own fee deferral programs. For example, the City of Sacramento implemented a policy in its 2016 General Plan update to allow affordable housing developers to defer fees until certificate of occupancy to help offset affordable housing development costs. This bill makes deferrals until certificate of occupancy a statewide policy for any priority residential development project. Should decisions about impact fee deferral programs, and the projects they apply to, should be left at the local level?
3. Don’t forget about me. In addition to changes on impact fee collection, this bill also requires local agencies to extend development entitlements by 24 months for priority residential development projects. The types of entitlements this bill covers is broad, including approvals, permits, or entitlements. Time limits on entitlements ensure that local conditions have not changed significantly since the project was approved. These time limits also give developers an incentive to begin construction on their projects for fear of losing the effort they put into securing that entitlement. This bill takes away the ability for local agencies to determine whether all entitlements should be extended in the same manner, and may actually delay some housing projects as developers wait for housing prices to increase, interest rates to lower, or other changes in the economics of housing construction. On the other hand, extending development entitlements grant developers more time to build projects that may have been delayed because of financing challenges or other issues. This could make it easier for some projects to pencil out, which can be particularly challenging for affordable housing projects.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT: (Verified 4/30/24)

California Yimby (co-source)
Housing Action Coalition (co-source)
American Council of Engineering Companies of California
Apartment Association of Greater Los Angeles
Bay Area Council
Calchamber
California Apartment Association
California Building Industry Association
California Community Builders
California Hispanic Chambers of Commerce
California Housing Consortium
California Rental Housing Association
Central City Association
East Bay for Everyone
East Bay Yimby
Fieldstead and Company, INC.
Fremont for Everyone
Generation Housing
Grow the Richmond
Habitat for Humanity California
Habitat for Humanity Greater San Francisco
House Sacramento
Housing Leadership Council of San Mateo County
Housing Trust Silicon Valley
How to Adu
Leadingage California
Livable Communities Initiative
Midpen Housing
Mountain View Yimby
Napa-Solano for Everyone
Northern Neighbors
Peninsula for Everyone
People for Housing - Orange County
Progress Noe Valley
Rand Paster Nelson
San Francisco Yimby
San Luis Obispo Yimby
Santa Cruz Yimby
Santa Rosa Yimby
Silicon Valley Leadership Group
South Bay Yimby
Southside Forward
Spur
Streets for People
Urban Environmentalists
Valley Industry and Commerce Association
Ventura County Yimby
Yimby Action

OPPOSITION: (Verified 4/30/24)

California Coalition for Adequate School Housing
California Special Districts Association
California State Association of Counties
City of Belmont
City of La Verne
City of San Marcos
East Bay Housing Organizations
El Dorado Irrigation District
Kern County Superintendent of Schools Office
League of California Cities
Urban Counties of California

Prepared by: Jonathan Peterson / L. GOV. / (916) 651-4119

4/30/24 13:33:51

**** END ****

SENATE COMMITTEE ON HOUSING

Senator Nancy Skinner, Chair

2023 - 2024 Regular

Bill No: SB 937 Hearing Date: 4/16/2024

SUBJECT: Development projects: permits and other entitlements: fees and charges

DIGEST: This bill extends development entitlements for certain housing development projects by two years and places certain restrictions on the fees and charges a local agency may impose on these projects.

ANALYSIS:

Existing law:

1. Requires every city and county to prepare and adopt a general plan, including a housing element, to guide the future growth of a community. The housing element must identify and analyze existing and projected housing needs, identify adequate sites with appropriate zoning to meet the housing needs of all income segments of the community, and ensure that regulatory systems provide opportunities for, and do not unduly constrain, housing development.
2. Establishes, under the Mitigation Fee Act, specific requirements a city must follow in establishing or imposing development fees and sets forth a process by which a developer may challenge the imposition of a fee.

This bill:

1. Extends by 24 months the time frame for any housing entitlement for a priority residential development project that was issued to and was in effect on January 1, 2024, and will expire prior to December 31, 2025.
2. Defines “priority residential development project” as specified streamlined and affordable housing projects.
3. Provides that if a state or local agency extends a housing entitlement between January 1, 2024 and the effective date of this bill, that housing entitlement shall not be extended for an additional 24 months.
4. Defines “housing entitlement” as:
   1. A legislative, adjudicative, administrative, or any other kind of approval, permit, or other entitlement necessary for, or pertaining to, a housing development project issued by a state agency.
   2. An approval, permit, or other entitlement issued by a local agency for a housing development project that is subject to the Permit Streamlining Act.
   3. A ministerial approval, permit, or entitlement by a local agency required as a prerequisite to issuance of a building permit for a housing development project.
   4. A requirement to submit an application for a building permit within a specified period after the effective date of a housing entitlement.
   5. A vested right associated with an approval, permit, or other entitlement.
5. Provides that a “housing entitlement” does not include:
   1. Development agreements.
   2. Approved or conditionally approved subdivision map acts that have already been extended (SB 9, Atkins, Chapter 162, Statutes of 2021.
   3. Preliminary applications under the Housing Crisis Act of 2019 (SB 330, Skinner, Chapter 654, Statutes of 2019).
6. Provides that the 24 month extension in this bill shall be tolled during any period that the housing entitlement is the subject of a legal challenge.
7. Provides that nothing in this bill shall preclude a local government from providing an extension in addition to the 24 months specified in this bill.
8. Provides that utility service fees related to connections may be collected at the time an application for service is received, provided those fees do not exceed the costs incurred by the utility provider resulting from the connection activities.
9. Provides that when a local agency requires a property owner or lessee to execute a contract to pay any outstanding fees or charges as a condition of issuing the building permit, the local agency may authorize an officer or employee of the local agency to approve and execute contracts on its behalf. Requires a local agency, prior to execution of a contract, to post a model form of the contract on its website.
10. Provides, for priority residential development projects, that if a local agency imposes any fees or charges on the housing development for the construction of public improvements or facilities, then all of the following conditions apply:
    1. Prohibits the local agency from requiring the payment of those fees or charges until the date the certificate of occupancy is issued. Utility service fees related to connections may be collected at the time of application for service is received, provided that those fees do not exceed the costs incurred by the utility provider resulting from the connection activities.
    2. Requires the amount of fees and charges to be the same amount as would have been paid had they been paid prior to the issuance of building permits. Prohibits the local agency from charging interest or other fees on any deferred amount.
    3. Provides that if the housing development includes more than one dwelling, the local agency may determine whether fees and charges shall be paid:
       1. On a pro rata basis for each dwelling when it receives its certificate of occupancy;
       2. On a pro rata basis when a certain percentage of the dwellings have received their certificate of occupancy; or
       3. On a lump sum basis when all the dwellings in the development receive their certificate of occupancy.
11. Provides that if the local agency does not issue certificates of occupancy for these types of housing developments, the final inspection shall serve as the certificate of occupancy.

COMMENTS:

1. Author’s Statement. “Senate Bill 937 seeks to minimize the impact of market fluctuations and high interest rates on housing production by delaying development fees and providing additional time post-entitlement. Many cities have deferred the collection of development fees during periods of economic hardship to prevent housing production from halting. Additionally, economic volatility can cause some projects to die because their entitlements expire before the developer can raise the money to complete the project. Cities grant entitlements to developers as the last step before construction begins, but they are typically only valid for a limited period before expiring. With today’s high interest rates and rising costs driven by COVID-related inflation, developers are facing a challenge to make projects pencil. SB 937 helps address these concerns by delaying the payment of development fees imposed by a local government until the certificate of occupancy is issued. Local governments may not charge interest rates on any deferred fees. Further, SB 937 provides developers with much-needed wiggle room by extending housing entitlements issued prior to Jan. 1, 2024 and set to expire on or before Dec. 31, 2025 by 18 months. These provisions will ensure market conditions do not dampen California’s work towards addressing our housing crisis.”
2. Impact fees. Local governments can charge a variety of fees to a development. These fees, commonly known as impact fees or mitigation fees, go toward infrastructure development (such as adding lanes to roads or supporting additional traffic) or other public benefits (such as new parks, schools, or affordable housing). In the wake of Proposition 13 in 1978 and the resulting loss of significant property tax revenue, local governments have also turned to development fees as a means to generate revenue. Given that California cities have tightly restricted funding sources, fees are one of the few ways cities can pay for the indirect costs of growth. The Mitigation Fee Act requires local officials, when establishing, increasing, or imposing a fee as a condition of approving a development project, to identify the purpose of the fee; identify the use of the fee, including the public facilities that the fee will finance; determine a reasonable relationship between the use of the fee and the development; and determine a reasonable relationship between the public facility’s need and the development. Local agencies must also produce an annual report on developer and other fees.
3. Housing entitlements. In general, constructing a housing development project requires local government approval at multiple stages; this approval process is often referred to as the entitlement process. An approval is generally considered an entitlement when it locks in the regulatory standards that a local government or state agency can apply to a project. Entitlements are powerful documents as they provide certainty to developers, which can help them secure financing for a project. However, entitlements also constrain the ability of local governments and state agencies to adjust for new conditions. Additionally, when an issued entitlement is outstanding, it alters the ability of the local government or state agency to approve other projects that could potentially be impacted by the pending project. Therefore, various entitlements are subject to expiration, although many may be extended at the discretion of the local government or state agency.

According to a study conducted by Berkeley Law School and others, Getting It Right: Examining the Local Land Use Entitlement Process in California to Inform Policy and Process, in which local government land use and review processes across selected cities in the Bay Area and Southern California were examined, “the processes by which local governments review residential development projects under their zoning ordinances and under CEQA varies from city to city. As a result, developers seeking to construct residential projects often must learn to navigate very different and complicated land use systems, even if they work in the same region.” In addition, developers of affordable housing projects must navigate a web of overlapping eligibility criteria and application deadlines for various state and local housing programs, which often results in project delays as developers work to line up various funding sources. An economic recession, such as current economic difficulty related to the COVID-19 pandemic, can result in even further delays.

Thus, the Legislature has occasionally sought to assist developers by extending certain entitlements. For example, AB 1561 (C. Garcia, Grayson, Chapter 195, 2020) included a provision for an 18-month extension for planning level and pre-building permit entitlements that were issued prior to the COVID State of Emergency declared by the Governor on March 4, 2020 and were set to expire prior to December 31, 2021. This bill, in recognition of factors such as rising interest rates, changes in insurance markets, and labor and construction costs, provides a 24-month extension for entitlements for priority residential development projects.

1. Recent legislative actions to provide certainty and transparency in the permitting process. Given the complexities of developing housing in California, and in particular multifamily housing, the Legislature and Governor have passed over 150 bills since 2016 in an effort to facilitate more housing production. One such set of reforms includes expediting and simplifying the approval process at the pre-entitlement, entitlement, and post-entitlement phases, including creating multiple pathways for by right approvals for ADUs, deed-restricted affordable housing, and market-rate housing (see AB 2234 Rivas, 2022 and SB 330 Skinner 2019). These entitlement reforms have provided more certainty as to what is required for permitting approval, and generally requires approval within specified timelines. This certainty and shortened approval timelines are particularly beneficial to affordable housing developers seeking funding from multiple federal, state, and local public funding sources. Additionally, this certainty provides more opportunities for multifamily developers to build in jurisdictions that are not housing friendly. Some local governments have intentionally made entitlement and permitting onerous to such a degree developers – and in particular affordable housing developers -- have avoided working in those jurisdictions altogether. Longer, uncertain permitting situations are risky for developers, and could kill projects all together. Streamlining unlocks more land opportunities, particularly in higher-resource, unfriendly housing cities.

This bill takes further steps to increase flexibility and certainty in relation to fees for priority residential housing developments:

• 1. Provides a 24 month extension for development entitlements.
  2. Prohibits a local agency from charging interest or other fees on any deferred amount.
  3. Provides that utility service fees related to connections may be collected at the time of application for service is received only if those fees do not exceed the utility provider’s costs for the connection.
  4. Prohibits a local agency from requiring payment of fees or charges until the date the certificate of occupancy is issued (existing law allows a local agency to require payment at the date of final inspection, which falls prior to certification of occupancy).

In addition, in cases where a local agency requires a contract requiring payment of fees and charges as a condition of issuing the building permit, this bill provides that the local agency may authorize an officer or employee to execute contracts on its behalf (to help avoid potential delay of having to wait for a legislative body to approve it in a public meeting) and requires the local agency to post a model form of the contract on its website.

1. Priority residential development projects. This bill initially applied to all housing development projects. To help address local government concerns about the costs of deferring fee payments, it was amended in Senate Local Government Committee to apply only to “priority residential development projects.” These projects, which are generally streamlined affordable housing developments, face greater difficulty in penciling out without government subsidies than market rate developments. The definition of priority residential development projects is based on AB 434 (Grayson, Chapter 740, 2023), which added specified housing laws to the list of laws that the Department of Housing and Community Development (HCD) is required to enforce.
2. Opposition concerns. All of the opposition letters received by the committee by the deadline referenced the prior version of this bill. However, local government advocates have indicated to the committee that they continue to have significant concerns with the 24-month deferment, which is still included in the current version of this bill.
3. Incoming! This bill was heard in the Senate Local Government Committee on April 3, 2024 and received a vote of 6-0.

Related Legislation:

AB 434 (Grayson, Chapter 740, 2023) –- added specified housing laws to the list of laws that the Department of Housing and Community Development is required to enforce.

AB 2234 (Rivas, Chapter 651, Statutes of 2022) –- established time limits and procedures for approval of, and requires online permitting of, post-entitlement permits.

AB 1561 (C. Garcia, Grayson, Chapter 195, 2020) –- required a local government’s housing element to include an analysis of governmental constraints upon housing for individuals identified under the Unruh Civil Rights Act to be members of a protected class and provides an 18-month extension for specified approvals of housing development projects. Includes a provision extending, by 18 months, the time frame for the expiration, effectuation, or utilization of a housing entitlement that was issued prior to, and was in effect on, March 4, 2020, and was set to expire prior to December 31, 2021.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

POSITIONS: (Communicated to the committee before noon on Wednesday,

April 10, 2024.)

SUPPORT:

California Housing Consortium (Co-Sponsor)

California YIMBY (Co-Sponsor)

Housing Action Coalition (Co-Sponsor)

American Council of Engineering Companies of California

Apartment Association of Greater Los Angeles

Bay Area Council

California Apartment Association

California Building Industry Association (CBIA)

California Community Builders

California Hispanic Chambers of Commerce

California Rental Housing Association

Central City Association

East Bay YIMBY

Fieldstead and Company, INC.

Fremont for Everyone

Grow the Richmond

House Sacramento

Housing Trust Silicon Valley

How to ADU

LeadingAge California

Livable Communities Initiative

Midpen Housing

Mountain View YIMBY

Napa-Solano for Everyone

Northern Neighbors

Peninsula for Everyone

People for Housing - Orange County

Progress Noe Valley

Rand Paster Nelson

San Francisco YIMBY

San Luis Obispo YIMBY

Santa Cruz YIMBY

Santa Rosa YIMBY

Silicon Valley Leadership Group

South Bay YIMBY

Southside Forward

SPUR

Streets for People

Urban Environmentalists

Ventura County YIMBY

YIMBY Action

OPPOSITION:

California Coalition for Adequate School Housing (CASH)

California Special Districts Association

City of La Verne

Desert Water Agency

East Bay Housing Organizations

El Dorado Irrigation District

-- END --

SENATE COMMITTEE ON LOCAL GOVERNMENT

Senator María Elena Durazo, Chair

2023 - 2024 Regular

Development projects: permits and other entitlements: fees and charges

Makes various changes to the process for local agencies to collect development impact fees, and extends development entitlements.

Background

The California Constitution allows cities and counties to “make and enforce within its limits, all local, police, sanitary and other ordinances and regulations not in conflict with general laws.” It is from this fundamental power (commonly called the police power) that cities and counties derive their authority to regulate behavior to preserve the health, safety, and welfare of the public—including land use authority. Local governments use their police power to enact zoning ordinances that shape development, such as setting maximum heights and densities for housing units, minimum numbers of required parking spaces, setbacks to preserve privacy, and lot coverage ratios to increase open space, among others. These ordinances can also include conditions on development to address community impacts or other particular site-specific considerations. Local governments have broad authority to define the specific approval processes needed to satisfy these considerations, including the permits the developer must obtain.

Local government finance after Proposition 13. A series of propositions have drastically cut into local revenue sources, requiring local governments to look elsewhere to fund services that the public demands. First, Proposition 13 (1978) capped property tax rates at 1% of assessed value (which only changes upon new construction or when ownership changes) and required 2/3 voter approval for special taxes; as a result local governments turned to general taxes to avoid the higher voter threshold. When Proposition 62 (1986) required majority voter approval of general taxes, local agencies imposed assessments that were more closely tied to the benefit that an individual property owner receives. Subsequently, Proposition 218 (1996) required voter approval of parcel taxes, assessments, and property-related fees.

In response to the reduction in property tax revenues from Proposition 13 and the difficulty of raising taxes, local agencies have turned to other sources of funds for general operations, including sales taxes and transient occupancy taxes, also known as hotel taxes. Commercial enterprises generate sales tax and hotel tax revenue, and simultaneously pay property taxes and demand relatively few services (such as public safety or parks). Residential developments, by contrast, do not directly generate sales or hotel tax revenue, and the new residents demand a wider variety of more intensive services. As a result, cities and counties face a disincentive to approve housing because of the higher net fiscal cost of residential development, particularly if they have the option to instead permit commercial development that may produce net fiscal benefits, also known as the fiscalization of land use.

Since they cannot impose broad-based taxes without great difficulty, cities and counties follow a simple principle: new developments should pay for the impacts they have on the community and the burden they impose on public services.

Mitigation Fee Act. When approving development projects, counties and cities can require the applicants to mitigate the project's effects by paying fees—known as mitigation fees, impact fees, or developer fees. The California courts have upheld impact fees for sidewalks, parks, school construction, and many other public purposes.

When establishing, increasing, or imposing a fee as a condition of approving a development project, the Mitigation Fee Act requires local officials to:

• Identify the fee’s purpose;
• Identify the fee’s use, including the public facilities to be financed;
• Determine a reasonable relationship between the fee’s use and the development; and
• Determine a reasonable relationship between the public facility’s need and the development.

When imposing a fee as a condition of approving a development project, the Mitigation Fee Act also requires local officials to determine a reasonable relationship between the fee’s amount and the cost of the public facility. In its 1987 Nollan decision, the U.S. Supreme Court said there must be an “essential nexus” between a project's impacts and the conditions for approval. In the 1994 Dolan decision, the U.S. Supreme Court said that conditions on development must have a "rough proportionality" to a project's impacts.

In the 1996 Ehrlich decision, the California Supreme Court distinguished between “legislatively enacted” conditions that apply to all projects and “ad hoc” conditions imposed on a project-by- project basis. Ehrlich applied the “essential nexus” test from Nollan and the “rough proportionality” test from Dolan to “ad hoc’ conditions. The Court did not apply the Nollan and Dolan tests to the conditions that were “legislatively enacted.” In other words, local officials face greater scrutiny when they impose conditions on a project-by-project basis.

As a result of these decisions and the Mitigation Fee Act, local agencies must conduct a nexus study to ensure any proposed impact fees meet these legal tests for most impact fees. Other requirements in the Mitigation Fee Act ensure that impact fees are appropriately levied and spent, including that a local agency must:

• Hold at least one open and public meeting prior to levying a new fee or increasing an existing one;
• If they decide to adopt capital improvement plans, indicate the approximate location, size, time of availability, and estimates of cost for all facilities or improvements to be financed with the fees;
• Deposit and spend the fees within five years of collecting them; and
• Refund fees or make specific findings on when and how the fees will be spent for construction, if the fees are not spent within five years of collection.

If a local agency levies an impact fee to fund a capital improvement associated with a development, it must deposit the fees with any other fees for that improvement in a separate account or fund.

Local officials must also produce an annual report within 180 days of the end of the fiscal year that includes information on the fee amounts, how they used the revenue, and any unspent funds.

Connection and capacity charges. Connection fees and capacity charges are one-time fees assessed on new customers that reflect the reasonable cost of providing service, typically for water or sewer systems. A local agency assesses a connection fee when it physically connects a structure to the water or sewer system, which pays for or the physical facilities necessary to make a water connection or sewer connection, such as meters, meter boxes, pipelines, and the estimated reasonable cost of labor and materials for their installation of those facilities. A local agency assesses a capacity charge on the customer to cover the proportional cost of maintaining or constructing system wide infrastructure necessary to meet the additional water or sewer demand for new users of the system. The Mitigation Fee Act governs connection fees and capacity charges, but state law provides separate provisions related to their oversight and accounting.

When a local agency imposes water or sewer connection fees or capacity charges, the fees or charges cannot exceed the estimated reasonable cost of providing the service without a 2/3 vote. If the local agency imposes a capacity charge, it must deposit revenues in a separate capital facilities fund to avoid any commingling with other moneys of the local agency, except for investments, and must only spend those charges for the purposes for which the charges were collected. Any interest income earned from the investment of moneys in the capital facilities fund must be deposited in that fund.

Impact fee collection. Generally, cities and counties cannot collect impact fees before they conduct the final inspection or issue a certificate of occupancy, whichever occurs first. Utilities can collect impact fees at the time the utility receives an application for service, which can happen before a final inspection. For residential developments with more than one dwelling, the local agency can determine whether developers pay fees on a pro rata or on a lump sum basis when the first dwelling in the development receives its final inspection or certificate of occupancy, whichever occurs first.

Local agencies can require payment earlier than described above if it has adopted a proposed construction schedule or to reimburse the local agency for expenditures already made, so long as the project does not come from a nonprofit developer that reserves at least 49% of units for lower income households. Cities and counties can require performance bonds or letters of credits to guarantee these specific payments.

If the developer has not fully paid the impact fees before the local agency has issued a building permit for construction of any portion of the residential development, the local agency can require the developer, as a condition of receiving the building permit, to enter into a contract to pay the fees, secured by a lien on the property. Additionally, the local agency can require the developer to provide notification of the opening of any escrow for the sale of the property, and disclose in the escrow instructions that the fees must be paid before disbursing proceeds to the seller. The local agency can defer collection of one or more fees up to the close of escrow.

The author wants to extend development entitlements and require local agencies to defer fees to help lower project costs for developers.

Proposed Law

Senate Bill 937 (1) makes various changes to the process for local agencies to collect fees, and (2) extends development entitlements.

Changes to impact fee collection. SB 937 would no longer allow local agencies to collect impact fees at final inspection, or upon receiving a request for service in the case of utility service fees. Instead, they could only collect them upon issuing a certificate of occupancy. Local agencies would only be able to collect funds on a pro rata basis when a certain percent of units receive their certificate of occupancy, not at final inspection. They would no longer have the ability to receive impact fee payments on a lump-sum basis when the first unit in the development receives its final inspection or certificate of occupancy. Instead, they would only be able to receive lump-sum payments when all the units receive their certificate of occupancy. Under SB 937, local agencies could not charge interest or other fees on deferred payments.

For projects where at least 49% of units are reserved for lower-income households, the amount due when the development receives its certificate of occupancy must be the same as would have been paid had the developer paid the fees prior to issuance of building permits. In addition, local agencies could no longer require the posting of a performance bond or letter or credit to guarantee payment of fees for these projects. These projects could be done by any affordable housing developer, not just a nonprofit housing developer.

SB 937 removes a local agency’s ability to collect fees earlier than either final inspection or certificate of occupancy if it has adopted a construction schedule or to reimburse the local agency for expenditures previously made. Instead, the measure would only allow local agencies to collect fees earlier if they have a proposed construction schedule for the infrastructure improvements and will commence construction before the final inspection or certificate of occupancy.

While SB 937 allows a local agency to withhold the certificate of occupancy from a development project if the developer does not fully pay the fees prior to issuing a building permit for the project, the local agency would no longer be able to require the developer to enter into a contract to guarantee the developer pays the fees. Additionally, SB 937 no longer allows local agencies to require the developer to provide notification of the opening of any escrow for the sale of the property, and disclose in the escrow instructions that the fees must be paid before disbursing proceeds to the seller.

Extends housing entitlements. SB 937 extends entitlements for housing development projects with at least 2/3 of the square footage for residential use by 24 months if the entitlement (1) was issued before, and in effect on, January 1, 2024; and (2) will expire before December 31, 2025. Housing entitlements include:

• A legislative, adjudicative, administrative, or any other kind of approval, permit, or other entitlement necessary for, or pertaining to, a housing development project issued by a state agency;
• An approval, permit, or other entitlement issued by a local agency for a housing development project that is subject to the Permit Streamlining Act;
• A ministerial approval, permit, or entitlement by a local agency required as a prerequisite to issuance of a building permit for a housing development project;
• A requirement to submit an application for a building permit within a specified period of time after the effective date of a housing entitlement; and
• A vested right associated with an approval, permit, or other entitlement.

Housing entitlements do not include:

• Development agreements;
• Approved or conditionally approved tentative subdivision maps already extended; and
• Preliminary applications under the Housing Crisis Act of 2019 (SB 330, Skinner).

If the state or a local agency extends the housing entitlement on or after January 1, 2024, but before SB 937 goes into effect, the housing entitlement cannot be extended for the additional 24 months.

If the housing entitlement is subject to a legal challenge, the extension must be tolled. The measure also declares it is not intended to preclude local agencies from using their existing authority to extend entitlements.

The measure also defines its terms.

Comments

1. Purpose of the bill. According to the author, “Senate Bill 937 seeks to minimize the impact of market fluctuations and high interest rates on housing production by delaying development fees and providing additional time post-entitlement. Many cities have deferred the collection of development fees during periods of economic hardship to prevent housing production from halting. Additionally, economic volatility can cause some projects to die because their entitlements expire before the developer can raise the money to complete the project. Cities grant entitlements to developers as the last step before construction begins, but they are typically only valid for a limited period before expiring. With today’s high interest rates and rising costs driven by COVID-related inflation, developers are facing a challenge to make projects pencil. SB 937 helps address these concerns by delaying the payment of development fees imposed by a local government until the certificate of occupancy is issued. Local governments may not charge interest rates on any deferred fees. Further, SB 937 provides developers with much-needed wiggle room by extending housing entitlements issued prior to Jan. 1, 2024 and set to expire on or before Dec. 31, 2025 by 18 months. These provisions will ensure market conditions do not dampen California’s work towards addressing our housing crisis.”

2. Home rule. Local agencies can already develop their own fee deferral programs. For example, the City of Sacramento implemented a policy in its 2016 General Plan update to allow affordable housing developers to defer fees until certificate of occupancy to help offset affordable housing development costs. SB 937 makes deferrals until certificate of occupancy a statewide policy, and applies to all projects, not just affordable housing. Should decisions about impact fee deferral programs, and the projects they apply to, should be left at the local level? The Committee may wish to consider amending the bill to limit its requirements to jurisdictions that have not sufficiently addressed housing affordability.

3. Choppy waters ahead? Sheetz vs. County of El Dorado, which is currently awaiting a decision in the U.S. Supreme Court, could have significant implications for how local agencies impose impact fees. An El Dorado County resident challenged the county’s legislatively enacted traffic impact mitigation fee arguing the county should only charge him based on the impact associated with his specific parcel. In other words, legislatively enacted fees should be subject to the same standards as ad hoc fees. The outcome of the court case could require significant revisions to the Mitigation Fee Act. A decision is expected by June 2024. Should the Committee consider Mitigation Fee Act legislation before learning the Supreme Court’s decision?

4. Winners and losers. By requiring local agencies to defer impact fee collection, SB 937 creates winners and losers:

• Developers benefit because paying later on in the process can result in reduced borrowing costs. The earlier on in the development process that a developer must borrow money to pay impact fees, the higher the borrowing costs because the project is farther away from completion and repayment of that debt is less certain. Shifting fee payments to later on in the process when project completion is more assured means the debt is more likely to get repaid, and interest rates on that debt may be lower. In other words, the local agency may still receive the same amount of revenue, albeit later, it just costs developers less to secure that revenue. While there are other significant factors that determine the cost of construction, such as labor, materials, and land costs, developers argue that lowering one input into the cost of the development could help some additional projects pencil out. For large developments where phases of the project could occur over years or decades, the developer could decide when to request a certificate of occupancy for different portions of the project. Since the local agency can only receive payment when it issues the certificate of occupancy for each portion of the project, the developer would be able to plan when it wants to pay the fees to minimize its costs. Additionally, local agencies could no longer require developers to disclose outstanding fee payments during the escrow process, which could allow the developer to pass on those costs to unaware buyers in terms of higher housing prices.
• Local agencies lose the certainty of receiving fee revenue earlier on in process to begin infrastructure plans. This revenue could trickle in more slowly since SB 937 only allows them to receive pro rata payments when a certain percent of units receive their certificate of occupancy and lump-sum payments when all the units receive their certificate of occupancy. For large projects that have many different phases, local agencies may have to wait years before the developer requests a certificate of occupancy for particular portions of the project. SB 937 also prohibits local agencies from charging interest on these fee deferrals. If a project takes a long time to proceed to certificate of occupancy, the local agency would prohibited from collecting impact fee revenue regardless of whether they are responsible for project delays. If a project is never completed, but the local government has already spent funds to help mitigate the development’s impact, it may never be reimbursed.

The Committee may wish to consider whether SB 937 adequately balances the benefits to developers with the costs to local agencies.

5. A closer focus. One way to help balance the benefits to developers and the costs to local agencies would be to focus fee deferrals on the types of projects that are the least likely to pencil out without government subsidies: projects containing substantial affordable housing. Since there are costs to local governments in deferring fee payments, focusing the benefits to developers on affordable housing projects would limit these costs to projects that yield the greatest societal benefit. Market rate developments confront cost pressures too, but it is unclear how many market rate developments need the additional savings to pencil out. It is even less clear whether any savings from fee deferrals will be passed on to consumers in terms of lower housing prices or rents instead of increasing developer profits. Limiting the scope of these fee deferrals would also provide time to collect data on (1) how much developers saved by deferring payment, (2) how long it takes developments to move from final inspection to certificate of occupancy, and (3) what costs local governments faced due to the delayed payment. The Committee may wish to consider amending the bill to only require fee deferrals for affordable housing projects.

6. Getting it right. In addition to requiring impact fee deferrals, SB 937 makes many changes to the impact fee collection process that warrant further consideration:

• While recent amendments removed references to connection fees and capacity charges, SB 937 still removes the ability for utilities to collect “utility service fees” when the developer applies for service. They would have to wait until the developer receives its certificate of occupancy. This could be challenging for utilities to implement for a variety of reasons. First, “utility service fee” is not defined, so it’s unclear what fees utilities could no longer collect when the developer applies for service. Second, utilities do not issue certificates of occupancy and may not be notified by the city or county with authority over the project when a certificate of occupancy is requested. The Committee may wish to consider amending the bill to restore the ability for utilities to collect fees when the developer requests service and define utility service fees.
• SB 937 removes the ability for local agencies to require developers to enter into contracts, secured by a lien on the property, to guarantee payment of fees. It also removes the local agency’s ability to notify potential buyers of outstanding fee amounts when they enter escrow. SB 937 replaces these tools with the ability for local agencies to withhold certificates of occupancy until the developer pays the fees. The developer may decide it does not need the certificate of occupancy until market conditions are right, further delaying fee repayment. Or, the developer may increase the sale price to cover the fee costs, and the developer could not be compelled to disclose these outstanding costs during the escrow process. The Committee may wish to consider amending the bill to restore these local agencies’ fee repayment tools.
• SB 937 removes the ability of local agencies to collect fee revenue earlier than final inspection or certificate of occupancy if (1) the local agency has adopted a construction schedule for the infrastructure improvements or (2) to reimburse the local agency for expenditures on infrastructure previously made. Instead, the measure would only allow a local agency to collect fees earlier if it will commence construction on its infrastructure improvements before the final inspection or certificate of occupancy for the development. Preventing local agencies from being reimbursed for expenditures they already made could delay projects needed to mitigate the impacts of the new development. The Committee may wish to consider amending the bill to restore a local agency’s ability to require fee payment earlier when they have adopted a construction schedule or to reimburse the local agency for expenditures previously made.
• Current law allows local agencies to collect fees when at final inspection or certificate of occupancy, whichever occurs first. While generally all permits receive a final inspection, not all projects receive a certificate of occupancy. The Committee may wish to consider amending the bill to allow the final inspection to count as the certificate of occupancy for projects that do not require a certificate of occupancy.

8. Don’t forget about me. In addition to changes on impact fee collection, SB 937 also requires local agencies to extend development entitlements by 24 months. The types of entitlements SB 937 covers is broad, including approvals, permits, or entitlements. Time limits on entitlements ensure that local conditions have not changed significantly since the project was approved. These time limits also give developers an incentive to begin construction on their projects for fear of losing the effort they put into securing that entitlement. SB 937 takes away the ability for local agencies to determine whether all entitlements should be extended in the same manner, and may actually delay some housing projects as developers wait for housing prices to increase, interest rates to lower, or other changes in the economics of housing construction. On the other hand, extending development entitlements grant developers more time to build projects that may have been delayed because of financing challenges or other issues. This could make it easier for some projects to pencil out, which can be particularly challenging for affordable housing projects. To balance these tradeoffs, the Committee may wish to consider amending the bill to require entitlement extensions for affordable housing projects, but make it at the local government’s option for market rate projects.

9. Charter city. The California Constitution allows cities that adopt charters to control their own “municipal affairs.” In all other matters, charter cities must follow the general, statewide laws. Because the Constitution does not define “municipal affairs,” the courts determine whether a topic is a municipal affair or an issue of statewide concern. SB 937 says its statutory provisions regarding development entitlements apply to charter cities. However, the bill does not state any specific reason why its provisions extending development entitlements are a matter of statewide concern. The Committee may wish to consider amending the bill to specify a clear reason why these provisions constitute a matter of statewide concern.

10. Mandate. The California Constitution requires the state to reimburse local governments for the costs of new or expanded state mandated local programs. Because SB 937 adds to the duties of local officials, Legislative Counsel says the bill imposes a new state mandate. But SB 937 disclaims the state’s responsibility for providing reimbursement by citing local governments’ authority to charge for the costs of implementing the bill's provisions.

11. Coming and going. The Senate Rules Committee has ordered a double referral of SB 937: first to the Senate Local Government Committee to hear issues related to local government, and second to the Senate Housing Committee.

12. Related legislation. The Legislature is considering several other pieces of legislation concerning the Mitigation Fee Act:

• SB 1210 (Skinner, 2024) prohibits new housing connection fees and capacity charges from exceeding 1% of the reporting building permit value, requires public utilities to spread fees over ten years from the date of occupancy, and requires public utilities to prioritize new housing construction connections over other service connections. The measure is currently pending in the Senate Energy, Utilities and Communications Committee.
• AB 1820 (Schiavo, 2024) requires a city or county to provide an estimate of fees and exactions for the project within 10 days of receiving a preliminary application for a housing development project upon a request from the project applicant for an estimate. The measure is currently pending in the Assembly Housing and Community Development Committee.
• AB 2553 (Friedman, 2024) redefines “major transit stop” for purposes of exempting housing developments within ½ mile of a major transit stop from specified impact fees. The measure is currently pending in the Assembly Local Government Committee.
• AB 2663 (Grayson, 2024) requires local agencies to post certain information regarding affordable housing impact fees on their websites. The measure is currently pending in the Assembly Housing and Community Development Committee.
• AB 2729 (Joe Patterson, 2024) removes the requirement on local agencies that fees must be paid prior to the date of final inspection or issuance of the certificate of occupancy, whichever occurs first. The measure is currently pending in the Assembly Local Government committee.
• AB 3177 (W. Carrillo, 2024) prohibits land dedications for the purpose of mitigating vehicular traffic on housing developments. The measure is currently pending in the Assembly Housing and Community Development Committee.

Support and Opposition

(4/1/24)

Support: California Yimby (Co-Sponsor)
Housing Action Coalition (Co-Sponsor)
American Council of Engineering Companies of California
Apartment Association of Greater Los Angeles
Bay Area Council
Calchamber
California Apartment Association
California Building Industry Association
California Community Builders
California Hispanic Chambers of Commerce
California Housing Consortium
California Rental Housing Association
Central City Association
East Bay Yimby
Fieldstead and Company, INC.
Fremont for Everyone
Grow the Richmond
Habitat for Humanity Greater San Francisco
House Sacramento
Housing Trust Silicon Valley
How to Adu
Leadingage California
Livable Communities Initiative
Midpen Housing
Mountain View Yimby
Napa-Solano for Everyone
Northern Neighbors
Peninsula for Everyone
People for Housing - Orange County
Progress Noe Valley
Rand Paster Nelson
San Francisco Yimby
San Luis Obispo Yimby
Santa Cruz Yimby
Santa Rosa Yimby
Silicon Valley Leadership Group
South Bay Yimby
Southside Forward
Spur
Streets for People
Urban Environmentalists
Ventura County Yimby
Yimby Action

Opposition: California Association of Recreation & Park Districts
California State Association of Counties (CSAC)
City of Belmont
City of La Verne
Desert Water Agency
East Bay Housing Organizations
El Dorado Irrigation District
League of California Cities
Urban Counties of California (UCC)

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