Can a linkage fee solve LA's housing woes?

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An LA City Council Committee signed off yesterday on the final draft of a plan to help pay for affordable housing in the city, and it's now up to the full City Council to decide what happens next.

The "linkage fee" is a fee on developers to help support the provision of affordable housing. It is not "inclusionary zoning," which provides for a portion of units in a building to be set aside as affordable. It is a fee that would be paid by developers into a trust fund managed by the city to provide new affordable housing and to help maintain some existing housing.

The fees would range from $3 to $5 per square foot for new commercial development and from $8 to $15 per square foot for new residential development. This would bring in an estimated $75 million to $92 million per year, which the the city planning department estimates is enough to help pay for the construction of an estimated 1,500 new units annually for low-income residents. That's nearly double the amount of affordable housing built in 2016.

Mayor Eric Garcetti told DnA last year, "I think it's a fair thing that when people are building luxury condominiums, expensive apartments, that they put some money aside to help working class and middle class people be able to afford to live in Los Angeles."

The goal of the tiered structure is to ensure that the fees don't deter developers from building in "low-market" areas, primarily in South Los Angeles and the Valley.

But the fee has been controversial, and industry and landlord groups have urged elected officials to reject the fee largely on the grounds that it would increase the costs of market-rate housing.

Every since the linkage fee was proposed, critics have been voicing their concern. For some the issue is one of too many fees -- developers already pay Quimby and CEQA fees -- and opponents say the linkage fee could also provoke developers to pass along the fees to tenants or buyers, effectively doing the opposite, they say, of what the mayor originally intended. A recent city planning report concluded that the fee would not result in a significant increase in housing prices.

Developers of affordable housing say such development is cost-prohibitive without government subsidies.

The fee would be charged to residential and commercial developers citywide, but under the plan recommended by the city council's Planning and Land Use Management (PLUM) committee, the amount would vary by real estate markets using boundaries defined in the city's community plans.

It also added a tiered structure that would be dependent upon the market rate of properties in a neighborhood, and a gradual phase-in of the fee over 18 months, rather than one year.

The committee did exempt hospitals, but also asked city staff to prepare a report about other group exemptions. It's not clear if any nonprofit organizations would be exempted.

Business groups including the LA Area Chamber of Commerce have come out against the linkage fee, arguing the fees could deter them from building at all, which would only exacerbate the housing shortage.

Olivia Lee represents the Chamber, and said in yesterday's committee meeting, "The proposed linkage fee will increase, not decrease, the cost of building. Therefore it will increase, not decrease, the cost of housing for the vast majority of Angelenos. We suggest that the city develop a much more comprehensive solution that does not pit one type of housing against another or encourage commercial and industrial businesses to choose a city other than LA to call home."

Photo: Construction on a new development in Hollywood. (Saul Gonzalez)