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Linkage Fees

Best Practice Category

Complete Neighborhoods Affordable Housing

Description

Linkage fees are a type of development impact fee charged to developers in order to preserve affordable housing and are designed to address the financing gap associated with building affordable housing. Linkage fees are typically adopted at the local level by city councils or zoning commissions and are employed when new development (commercial and residential) occurs in an area. In order for linkage fees to have an impact on station areas, municipalities can designate certain parcels for affordable housing within a specific plan or other adopted planning document or ordinance to be a receptor site once linkage fees are collected.

For example, when a planned retail development is projected to produce more jobs than the current housing market supports within a station area, a linkage fee can be charged to developers (on a square foot basis) as a remedy for the jobs-housing imbalance (PolicyLink, 2002).  Jobs and housing nexus studies are conducted to determine the need for a linkage fee. Nexus studies evaluate the impact of new development on the demand for affordable housing and analyze the relationships between commercial and market-rate housing development projects, job creation, and demand for affordable housing.

The City of Los Angeles is currently developing an Affordable Housing Linkage Fee program to establish a permanent source of local funding for affordable housing (City of Los Angeles, 2016). This ordinance will help address the impacts of new development on the demand for affordable housing by imposing a fee on certain types of market rate development. These fees would then become part of a fund for the creation of affordable housing across the City. The Housing and Community Investment Department of Los Angeles and the Department of City Planning will use a recently completed Nexus Study to move forward in the process of drafting the ordinance.

Outcomes

  • A permanent source of local funding dedicated to affordable housing
  • Keeps developers accountable for contributing to affordable housing stock

Examples

Santa Monica, CA In 2014, the City of Santa Monica adopted the Affordable Housing Mitigation Requirement (MC 9.68.040), an ordinance facilitating the development and availability of affordable housing through commercial linkage fees. The Municipal Code states that all nonresidential portions of a project shall pay a certain amount per square foot, based on the type of use. Fees range from $3.07 per square foot for hotel and lodging, to $11.21 per square foot for office uses.

San Jose, CA –The City of San Jose adopted a Housing Impact Fee which establishes a $17.00 fee (adjusted annually) per net livable square foot on market-rate rental housing developments that produce three or more units.

Additional Examples

Fairfax County, VA – Fairfax County implemented a linkage fee program in response to planned transit development near Tysons Corner, a popular shopping destination.

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