City Council sets Affordable Housing Fees on new development; funds dedicated for use of affordable housing strategies and programs
At its meeting held March 5, the Milpitas City Council took action to generate funds for affordable housing by establishing two types of fees on new development projects within the City: 1) a residential in-lieu fee to be paid by a developer in place of building affordable rental or ownership housing units on-site as part of a new development, and 2) an impact fee for non-residential developments to account for employees who work near new commercial and industrial development. The funds from these newly established fees will be solely committed to use by the City for the purpose of providing very-low, low and moderate income housing in Milpitas. This action further demonstrates the Council’s strong commitment to providing a variety of housing strategies and programs to address the City’s need for affordable housing.
“This is another huge milestone for the Milpitas community when it comes to affordable housing,” said Mayor Richard Tran. “Establishing these fees represents that we are working hard as a City Council to address affordable housing concerns expressed not only by Milpitas but of this entire region. This is another step towards ensuring that we are limiting the level of displacement among our more vulnerable residents and are keeping families together here in Milpitas.”
In June 2018, the Council adopted an Affordable Housing Ordinance, requiring 15% of the units in any development of 10 units or more to be set aside for affordable rental units for very low or low income households and affordable ownership units as very low, low or moderate income households. Under this Ordinance, residential developers of owner-occupied developments are required to provide affordable units in their proposed development; however, they may request an in-lieu fee instead of providing the affordable units in the project, and developers of rental residential projects may either provide affordable units onsite or pay the affordable housing fee. New non-residential development would be required to pay the affordable housing fee. The fee levels adopted by the Council on March 5 reflect and re-emphasize the goal to construct the affordable units within new residential development.
“Our residents have voiced their concern over affordability, loud and clear,” said Vice-Mayor Karina Dominguez. “As leaders of Milpitas, setting these fees is a great opportunity to raise millions of dollars dedicated to affordable housing for our current and future residents. Milpitas is known throughout the region as an ideal location for development and these fees will keep us competitive but also provide for much needed funding for permanent affordable housing options.”
Following previous City Council direction, staff consulted with Keyser Martson Associates to complete a Nexus Study, which evaluated the relationship or nexus between new development and the impact that these new developments would have on affordable housing in the City of Milpitas. The Study aims to provide guidance when establishing the maximum fee that could be collected to help mitigate affordable housing demand, while also not discouraging future development. Based on the Study and extensive public input, including five community meetings attended by community members, developers, and representatives of the Building Industry Association (BIA) and SV@Home, as well as testimony from the Public Hearing, the Council set the affordable housing fees, as follows:
Residential In-Lieu Fees
| Building Permit Application Date | Ownership | Ownership | Ownership | Rental |
| Single Family | Townhome | Condominium | Apartment | |
| July 1, 2019 – June 30, 2020 | $33 | $33 | $33 | $33 |
| Each Subsequent Fiscal Year | Adjusted by Rate Index per Affordable Housing Ordinance | |||
* Fees based per square foot
Non-residential Impact Fees
| Building Permit Application Date | Commercial (Office, R&D, Retail and Hotel) | Industrial, Manufacturing and Warehouse |
| July 1, 2019 – June 30, 2020 | $4 | $1 |
| July 1, 2020 – June 30, 2021 | $6 | $3 |
| July 1, 2021 – June 30, 2022 | $8 | $4 |
| Each Subsequent Fiscal Year | Adjusted by Rate Index per Affordable Housing Ordinance | |
* Fees based on square foot
The Affordable Housing Fees were unanimously adopted by Resolution No. 8852 and will be integrated into the City’s Master Fee Schedule.
To view the agenda report, with a complete analysis on the fees, please visit the City’s website. The Nexus Study is also available on the City’s website.
