In 2016, Oakland Mayor Libby Schaaf unveiled her signature affordable housing strategy based on collecting Impact Fees from market rate developers. But at recent Community and Economic Development Committee meetings, the City Administrator admitted there is currently no way of knowing how much has been collected--or even if many of the mandated fees were collected at all.
The City of Oakland has failed to account for what could be tens of millions of dollars in Affordable Housing Impact Fees for the past 3 years, affordable housing advocates and developers say. The failure to track the Impact Fees, which have been assessed on new residential development since September 2016, means that the City has been able to offer no more than 7 million dollars from the fund to affordable housing developers since the ordinance was passed by City Council.
Questions over Impact Fees have been brewing slowly as anticipation for the funds has built over the last three years. But the issues came to a head in May when affordable housing developers and advocates began comparing the City’s poorly reported Impact Fee assessment with the kinetic issuing of building permits in 2018. The fees also became a lightning rod during budget deliberations in June, when Council President Rebecca Kaplan sought to access more robust Impact Fee funding, but could not get simple answers about totals from an evasive City Administrator’s Office. The CAO claimed that that the ‘volatile’ funds could not be predicted or ‘baselined.’
In June, just before the Council’s Summer recess, the CAO responded to Council and community complaints about the poor record keeping by promising a substantive audit at the first post-recess Community and Economic Development Committee meeting on September 10. But the report item—which lacked any documents—was pulled from the September 10 meeting earlier this month. At the time, Assistant City Administrator Maraskeshia Smith claimed the CAO had 'capacity" issues and would need more time to complete the audit. The Impact reporting item was rescheduled to a November meeting.
Frustrated affordable housing advocates and developers gathered at last Tuesday’s CED Committee meeting, complaining about the reporting failures and the CAO's continued postponements.
“There’s a scandal somewhere,” said Elissa Dennis, at the dais on Tuesday. Dennis, an affordable housing financing consultant at the non-profit Community Economics, later told me that affordable housing advocates and developers have waited for the fee funds to piece together financing for affordable housing projects, but almost no funds have become available. “We kept asking, 'how much is there?' And no one seemed to know.”
Dennis says that until she and other advocates started asking earlier this year, apparently no one entity or person at the City had been working on tracking Impact Fees.
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Affordable Housing Impact Fees are calculated when the developer submits their application to the building department. Half the funds are due when the permit is approved, the other half before a certificate of occupancy is approved at the end of the development and construction process. Some developers aren’t subject to the fees. Some may have pursued built-in alternatives—such as providing an equivalent number of affordable housing units or adding greater density. Developers that had ‘vested rights’ at the time of the ordinance passage are exempt from the Impact Fee structure, also. And most developers who’d submitted a complete permit application before the effective date of the ordinance don’t fall under its rubric. In the first year of the Impact Fees, it was difficult to predict how much money would become available, according to housing advocates, due to these factors.
Affordable housing advocates and developers began to notice problems with the reporting in late 2017, when the Impact Fee fund’s first mandated annual report for the fiscal 2016-17 year was released. According to Jeffrey Levin, the Policy Director at East Bay Housing Organizations, the report was disappointingly lacking in specifics.
“We wanted to see a list of permits issued, how much they paid in their first installment, exemptions and reason for exemptions,” Levin said. But none of that was there.
The next fiscal year Impact Fee report for 2018, released in December of that year, was slightly more ample, but did little to calm housing advocates. According to Levin, the numbers just didn’t add up.
“The City said they’d assessed 20 million in fees through 2018, but they had only collected 3 million,” Levin noted.
In January 2019, Levin and EBHO--which represents a consortium of advocates and affordable housing developers—asked for more rigorous reporting that included data about the developments and possible exemptions. The City offered no additional reporting.
The City publishes data about the yearly number of permits approved by calendar year in its Housing Element Progress Report usually released early in the following year. Once that 2018 report was released, the staggering growth in permit activity brought up even more questions.
The Impact Fee ordinance had passed at the beginning of an explosion in development—Levin, who has spent decades working in housing development in Oakland, says he’s never seen anything like it. Issued permits doubled between 2016 and the first report in 2017. In 2018, according to the Housing Element Report, the number of permits had doubled again to 9700—most of that for market rate housing.
By 2018, approved projects should have been wholly subject to Impact Fee assessments unless developers had opted for the alternative of constructing affordable units instead, or if they had a ‘vested’ project. Moreover, the Impact Fee schedule was incrementally phased in over three years. Though this nod to developers frustrated affordable housing advocates, it also meant that by 2018, the Impact fees were nearly five times what they were at the program’s inception. Comparing the two staggered reports raised many more questions.
“The mismatch between the number of permits and the amount of money was bizarrely off. It didn’t make sense that so little had been collected,” Levin recalled.
EBHO sent another letter to the City Council, looking for the answers. “We were told in May an audit would take a couple of months and the expectation was it would be coming to the Committee at its first meeting in September,” Levin said. But the audit has yet to be seen.
“Until we started asking the question in the Spring, no one was working on it.” Dennis said. “And then there was a question of who had the information. There doesn’t seem to be a master list of the projects that submitted for permits.”
Dennis also noted the inscrutable lack of urgency in the City’s response. “If somebody had started counting [permit activity] in June they should have been able to count them by now,” she said.
Responsibility for the fees is spread out over three different departments, according to Levin: the Building Department assesses and collects the fee, the Planning Department issues the reporting, and the Housing Department is responsible for allotting the money. But in this case, none of the departments are tracking who is required to pay, when they have paid, and what they have paid.
Levin says that the City has a relatively new tracking system for planning and building permits and notes that it should be possible to pull a report from it that lists the fee assessed and collected. “So why isn’t that system tracking this? There could be a logical explanation for it all, but it hasn’t been provided.”
Regardless, Smith claimed at the September 24 CED meeting that the CAO must now hire an outside consultant to do the auditing because it has no tracking process in place. It’s this hiring process for an outside consultant that Smith claimed is responsible for the delay.
In the meantime, Levin, Dennis, and other housing advocates note that time and opportunity to leverage the Impact Fees to create new affordable housing is slipping away. Affordable housing developers gather funding from state and federal sources in competitive processes, vying against developers in other cities. The commitment of city funds to a project increases its chance to receive state and other kinds of funding, and in many cases it's a prerequisite. Without a city Notice of Funds Availability—a notice from the City that it intends to release and award money for housing projects through an application process—the city funds are impossible to access.
Adam Kuperman, Senior Project Manager at Satellite Affordable Housing Associates noted the urgency for a robust NOFA with Impact Fee funding at the September 24 CED meeting, reminding Council members that the State of California currently has a "historical abundance" of affordable housing funding—$1 billion's worth for the entire state, via the passage of Proposition 1.
"We need to leverage these local city funds in order to be competitive [for the state funds]" Kuperman implored. Kuperman punctuated the affordable housing shortage by revealing that a recent Satellite development of 36 affordable units in East Oakland was met with over 4,000 applications.
The City’s last NOFA was only for housing developers that are already in the application pipeline—mostly developers who applied but did not receive money in previous NOFAs. An upcoming City NOFA in November will have the same limitations. Ironically, the NOFAs are low owing partly to the fact that more Impact Fee funds have not been made available. Affordable housing developers say that the opportunity to access a new large source of state funding with applications due next March will be lost if the Impact Fee funds aren’t put into a NOFA as soon as possible.
Levin estimates that there could be anywhere from 50 million to 70 million dollars assessed from Impact Fees. It’s a conservative estimate, according to Levin, low-balling the number and size of developments subject to the fees. That would mean 25 to 30 million should be available now for disbursement—not the 7 million in fees the CAO claims is currently available.
EBHO urged the City to make all current collected funds available and to release a NOFA based on an assessment of the total funds receivable—the portions due at the beginning and end of the construction process—in another letter sent to Council earlier this month. They say the funds needn’t be committed until projects are further along and ready to access the money, which can take years. An audit will then let the City and affordable housing advocates know how much money has been collected, is still being processed, or wasn’t collected and for which reasons, according to Levin.
Council President Kaplan, for her part, has responded to the community demands with a resolution instructing the CAO to identify and release both collected and committed Impact Fees and to then issue a NOFA based on the funds. “Many fund sources in our budget are ‘volatile,’” Kaplan told me, “nonetheless, we estimate them, budget them and plan for their use ahead of when funds are actually received.”
Kaplan’s proposal will be heard in late October, in committee while the City’s new deadline for the Impact Fee audit is November 12—that is, if the City Administrator doesn’t again postpone it.
* The City Administrator's Office was contacted for comment for this story, but as of this writing had not responded.