A few weeks after the Bend City Council voted to exempt affordable housing developers from paying fees meant to cover the costs of new development on city infrastructure, two councilors are looking at other ways to use those charges to spur construction of more homes.
Oregon law allows local governments to charge one-time fees, called system development charges, on new construction. These fees can be used for capital improvements, such as new roads, parks and sewer or water pipes and treatment plants.
However, cities also use the fee structure to encourage certain types of development. Bend recently passed a new law waiving system development charges for new affordable housing developments, and the City Council last year lowered system development charges for granny flats added to existing properties.
Now, Councilors Justin Livingston and Bill Moseley are looking at other ways to use these charges to address Bend’s housing crisis, either by charging less for smaller homes or by charging higher transportation fees to build roads more quickly.
Livingston thinks Bend can do more to encourage smaller, less-expensive homes by tiering system development charges so larger homes with more bedrooms or plumbing fixtures cost more. Because all single-family homes now pay the same fees — $5,220 for water, $4,665 for sewer, $5,285 for roads and $7,358 for parks — developers now are encouraged to build larger homes that cost more so they can recoup the fees, said Livingston, who is also a real estate agent.
“Right now, what we do is discourage building smaller homes,” he said. “Second to land, the second largest item on a developer’s budget is city fees.”
Basing SDCs on lot size, the number of bedrooms or a home’s square-footage was among a series of recommendations from a Bend 2030 work group that aim to encourage middle-market homes, and members of Bend’s Affordable Housing Advisory Committee are interested in looking into the recommendation.
“I just don’t see why a 12,000-square-foot house should pay the same as a 4,000-square-foot house,” committee member Kathy Austin said at the group’s last meeting.
The committee had a “pretty big win” with the affordable housing exemption, Bend Affordable Housing Manager Jim Long said, and it may not be able to replicate that success with another change to system development charges. But Livingston said he plans to suggest lower system development charges for smaller homes the next time the City Council reviews the charge methodology, which it does regularly.
Transportation charges could be based on the number of bedrooms, he said, because a house with a single person would likely have less impact on Bend’s roads than a house with multiple drivers.
“I don’t think that having a one-bedroom or two-bedroom house has the same impact as a three- or four-bedroom house,” Livingston said.
As for water and sewer charges, the city could base charges on the number of faucets, he said.
The city of Sisters bases its water and sewer charges on the number and type of plumbing fixtures. Each bathtub in a new home in Sisters costs more than $500 in water fees and $370 in sewer fees, while a bidet runs developers less than $130 in water fees and $185 in sewer fees.
This method can be cumbersome for developers, said Andy High, chairman of Bend’s affordable housing committee and former Central Oregon Builders Association vice president of government affairs.
“No one’s found the magic bullet yet,” High said. “Just everyone hates them.”
Higher transportation SDCs
Bend is preparing to annex 2,380 acres of land as part of its most recent urban growth boundary expansion, and most of that property is not yet ready for development. Major road upgrades will be necessary to fully connect the new areas to the existing city.
At least some of these new or upgraded roads will likely be included in a bond measure the city of Bend expects to send to voters in the next couple of years. A citywide transportation committee that will begin meeting early next year will help the city council set Bend’s transportation plan and decide on major capital projects.
Moseley said he has mixed feelings about a transportation bond. If roads are being built for new development, the developers should pay for them, he said.
“I don’t think we should all share the costs of new roads among all the property owners in the city,” he said.
To that end, he suggested increasing transportation SDCs for new development within the urban growth boundary. Having developers pay more — up to $10,000 — in system development charges and using that money on projects in the urban growth boundary will allow more homes to be built and ease a scarcity that’s led to skyrocketing housing costs, he said.
“The SDCs are a short-term thing we can do to get roads online now,” Moseley said.
Other councilors agreed earlier in November to look into adding supplemental system development charges for the area, but Mayor pro tem Sally Russell said the city should be careful about adding new fees without knowing how they might affect the supply of housing.
“If our goal is affordable housing, I want to be really, really careful about taking this in isolation,” Russell said at the time.
Economic principles dictate that developers can’t pass all cost increases on to home buyers, Moseley said. If a developer tries to charge $10,000 more for a home built after costs went up but another cheaper home is also on the market, the developer can’t charge as much.
“All the new homes are being built in competition with the houses that are already built,” he said.
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