WeHo Housing Consultant Recommends 180% Increase in Commercial Development Fee

A consultant engaged by the city to evaluate the fees it charges developers to support West Hollywood’s affordable housing trust fund is recommending a 181 percent increase in the fee it levies on developers of non-residential properties.

revenue increaseThe consultant, Keyser Marston Associates Inc. (KMA), recommends that the fee be increased from the current $2.85 per square foot of building area to $8 per square foot. That fee is applicable to projects of 10,000 square feet or more. KMA recommends that the increase be phased in over a two-year period and not be applied to projects currently in the development pipeline.

The fee is considered an “impact fee,” which means it is designed to offset the costs to the city of commercial development. According to the KMA study, since 2002 West Hollywood has levied this fee on 17 non- residential development projects, generating approximately $2.57 million in revenue. “The recommended increase in the fee amount should generate significantly greater revenue to the city,” the KMA study says.

West Hollywood also assesses a fee of $25.67 per square foot on developers of residential properties with 10 or more units who do not provide low-income housing. Those who build from two to 10 units pay a smaller fee based on a sliding schedule. Until recently, the city required all residential projects with 10 or more units to set aside 20 percent of them for low- and moderate-income households. Some developers do add housing for low-income people to their proposed projects anyway to get the city to grant an exception to rules governing the size of a project

Revenue from both the residential and non-residential fees goes into an affordable housing trust fund. According to a recent report by the West Hollywood Community Housing Corp. (WHCHC), that fund is nearly depleted. Money in the trust fund is available to non-profit organizations such as WHCHC to build or finance projects in which at least 60 percent of the total units are available to low- and moderate- income households and 20 percent to low-income households only. The incomes for such households are defined by the U.S. Department of Housing and Urban Development as $25,601 to $42,700 for families of four (low-income) and $68,301 to $77,750 (moderate income).

Because of lawsuits challenging the validity of developer fees, KMA recommends that the city redefine the fees assessed on residential projects to make clear that they are designed to offset their impact on the city and are not considered a payment required in lieu of building low-income housing units.

KMA conducted a complex analysis of the city’s residential and non-residential real estate market to come up with recommendations for the fees. Its study found that the $8 fee is falls within the medium range of fees charged by 26 other California cities and is unlikely to have a negative impact on development given the demand for property in WeHo.

The KMA study also cites a number of facts about West Hollywood’s housing situation:

1. The number of total residential units in West Hollywood increased by 2.3 percent between 2000 and 2014, which demonstrates the built-out nature of the community.

2. Nearly 90 ninety of the city’s housing is found in multifamily projects.

3. The vacancy rate in West Hollywood has increased from approximately 4.1 percent in 2000 to approximately 8.5 percent in 2014. This represents a 106 percent increase over the 14-year period.

4. The 2012 American Community Survey (ACS) by the U.S. Census identified 22,511 occupied housing units within West Hollywood. Of those, 22 percent were owner-occupied and 78 percent were renter-occupied units.

5. West Hollywood’s average household has 1.55 people, which has remained relatively the same since 2000. The household size is significantly smaller than the 3.02 persons per unit average in Los Angeles Count and the 2.95-person statewide average.

6. The median household income in West Hollywood was $53,223, while the median household income for Los Angeles County was $56,241, according to the 2012 ACS survey. KMA notes that the small size of West Hollywood households is a factor there. The per capita income of West Hollywood residents is nearly double the per capita income for the entire county.

KMA also analyzed development permit information for the period between 1998 and 2013. During that period, 46 residential projects with four units or more were built — 35 of them condominium projects and 11 apartment projects.

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