Redwood City corrects housing fee oversight

When the city adopted the fee ordinance, it gave staff the authority to increase the fee annually based on the percentage increase of the Engineering News-Record Construction Cost Index for San Francisco. But since its adoption six years ago, the fee has gone unchanged while hundreds of thousands of square feet of development has been approved. 

City Manager Melissa Stevenson Diaz noted staff was not required to increase the fee annually despite having the power to do so. But she also pointed to years of staffing changes, shifts in responsibilities between departments and the juggling of a number of housing initiatives for the reasons behind the oversight. 

“I wouldn’t want to imply that there was an intentional decision to hold off on the increase. I think that would be overstating it,” Stevenson Diaz said. 

She went on to credit Alin Lancaster, the city’s housing leadership manager, with identifying the fee had gone unchanged for years, noting it was adopted before Lancaster was hired. Lancaster was appointed to the role at the end of 2019 after serving as the Housing and Community Development manager for Union City for roughly four years. 

Stevenson Diaz acknowledged the city hasn’t always been successful at building effective processes for implementing policies but lauded Lancaster’s experience and asserted the city is “in a much better place” thanks to her work. 

Lancaster said staff was seeking to increase the fee for nonresidential developers to help boost the number of affordable units being built in the area but wanted to avoid increasing the fee for residential developers out of concern it would have the opposite effect. 

“We recognize the need for housing in our community and that there is a significant interest in nonresidential development and we want to make sure that we are keeping our fees aligned with the rising cost of construction,” Lancaster said. 

Both Lancaster and Stevenson Diaz noted very few developers actually pay the Affordable Housing Impact Fee, instead often opting to build affordable units themselves as a community benefit. Staff informed stakeholders the fee would be discussed Monday and, if approved, would take effect Feb. 18. The city also held two information sessions to inform past and current developers, including nonprofit applicants, of the potential amendments.

Responding to questioning from Councilmember Michael Smith about lessons learned from the oversight, Stevenson Diaz said staff recognizes substantial attention is required for implementing effective processes and said additional staff will allow departments to rise up to the task. 

“It is complicated to make sure that we are staying in alignment with all of those requirements as well as doing the innovative and interesting policy work that the council has been strongly supporting in the last seven years,” Stevenson Diaz said, noting it “remains a challenge.” 

Smith joined other councilmembers in sharing his support for updating the fee while also encouraging city staff to think critically about ways departments can track program implementation. 

Other councilmembers pushed for additional changes, including Vice Mayor Diana Reddy who said she’d like to see the council consider fee changes for smaller developers as well. 

Additionally, Reddy informed staff of a future measure she’d like to propose which would change the breakdown of the city’s affordable housing requirement for residential developers. Currently, the city requires residential developers building 20 units or more to list 20% of those units at below-market rate, with 10 units set at moderate-income level, 5% for low-income and 5% for very low. 

But Reddy, a longtime affordable housing advocate, said she’d like to see the percentage of moderate units required dropped to 5% while identifying the remaining 5% for extremely-low-income households. 

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