Reducing Development Costs with Impact Fee Deferral
The City of Los Angeles charges developers over $140 million per year in fees to offset the service and infrastructure impacts of new residential development. Many fees are collected early in the development process, when developers’ financing costs are highest. As a result, the true cost paid by developers can greatly exceed the value of fees paid to the city. This added cost provides no benefit to the public, but it does limit the production of new housing by reducing the number of parcels available for redevelopment. A fee deferral program would bring the cost to developers in better alignment with the value to the city by requiring fee payment at a later date, when financing costs are lower. This would modestly boost housing production and improve housing affordability at no cost to the public.
