SB 937 would reduce financing costs for new homes – goes to the governor

“We must do everything we can to reduce housing costs, and SB 937 is an important step”

SACRAMENTO — On Wednesday, the California Legislature passed SB 937, a bill by Senator Scott Wiener (San Francisco), which would reduce the cost of housing construction by delaying the collection of development fees on new homes by local governments. California YIMBY, the California Housing Consortium and the Housing Action Coalition co-sponsored the bill.

Most local authorities charge builders a number of fees when they apply for a building permit. These fees cover a wide range of items, from administration and inspection costs to schools, parks, libraries and other local amenities. In some jurisdictions, these fees can be as high as $150,000 per home.

The timing of the collection of these fees affects the final cost of the homes: If authorities collect fees when the first building permits for the homes are issued, builders must finance those fees with high-interest construction loans — adding tens of thousands of dollars to the cost of the homes. By delaying the collection of the fees until the homes are built, SB 937 would allow builders to cover the cost of the fees through rental income or mortgage loans, which have much lower interest rates than construction loans.

“Giving developers more flexibility in how they build housing is a win for all Californians,” said Senator Wiener. “I am pleased with the progress being made in ensuring that development fees create as few barriers to housing as possible. The partnership with California YIMBY has been invaluable and I look forward to working together to reduce barriers to housing in the years to come.”

“Californians know housing is too expensive, but the impact of housing fees is not widely understood,” said Brian Hanlon, CEO of California YIMBY. “With this subtle change to housing finance, SB 937 will lower the cost of new homes while still allowing local governments to collect the fees they use to fund local services. It’s a win-win.”

In addition to ongoing restrictions on housing construction in most California cities, construction costs and high interest rates have further fueled high housing costs. These increased costs, along with local development fees, make building new housing even more expensive. In many cases, high fees and construction costs are enough to significantly delay or even prevent much-needed housing projects.

SB 937 would save tens of thousands of dollars in financing costs for new homes without reducing local revenue.

About California YIMBY

California YIMBY is a community of neighbors welcoming more neighbors. We believe an equitable California starts with abundant, safe, and affordable housing. We focus on housing and land use policy at the state and local levels to ensure grassroots organizers and city leaders have the tools they need to advance housing. Learn more: https://cayimby.org/