Local governments in the country's largest and most desirable cities are trying to create more affordable housing as home prices steadily rise. And some of the methods being used in the expensive San Francisco Bay Area and elsewhere place the cost burden on developers. But is this actually something that will provide a solution or make matters worse?
I'm Kathy Fettke and this is Real Estate News for Investors.
So-called "impact fees" are becoming more popular across the country to help address the affordable housing crisis. Impact fees are typically imposed on builders who must pay a certain amount per square foot for a new development project. Those fees are then used to pay for public facilities and in this scenario, for affordable housing.
Many Bay Area cities have already adopted impact fees or are considering them. In San Jose, city officials adopted a $17 per square foot fee in November of 2014. The resolution requires that developers pay the one-time fee for projects that have three or more units.
Some housing advocates, including The Sacred Heart Housing Action Committee, wanted a $28 dollar per square foot fee. The organization says that developers need to pay their fair share for a problem that they helped create. But is it fair to place the blame for the affordable housing crisis on developers?
A better question actually might be - is it prudent? Builders are generally not non-profit organizations. If they can’t make a profit, they might not build - at least not in the areas where it’s cost-prohibitive.
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That's why Real Wealth Network is actively building residential units in Reno, Nevada - because the numbers pencil out very nicely. And there's high demand for housing in the Reno area because businesses are also leaving California in search of areas that don't tax and regulate them to death. Tesla was able to break ground on it's gigafactory outside Reno after a very quick approval from the city planners.
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