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April 13, 2017

Greens to County Board–Raise the Fees on Developers to Get $7 million more to help 2,000 Arlington families

Arlington Green member Steve Davis spoke at the Arlington County Board’s March 30 Budget Hearing for FY 2018, and urged the board to raise the fee on developers in order to get $7 million for housing grants for another 2,000 families in Arlington struggling with high rents

Raising $7 million more in tax revenue for the county housing grants program through
a higher developers’ fee

Under the 2005 Affordable Housing Ordinance, the county requires developers of new housing projects needing or requesting a zoning change for the project to provide that at least 5 percent of the additional apartments added as a result of the zoning change to be “affordable rental units” or to pay a fee or a “cash contribution: as follows:
$1.88 per square foot of Gross Floor Area (GFA) for first 1.0 FAR;
$5.01 per square foot of Gross Floor Area (GFA) from 1.0 to 3.0 FAR for residential;
$10.02 per square foot of Gross Floor Area (GFA) above 3.0 FAR for residential; and
$5.01 per square foot above 1.0 FAR in commercial.

Unfortunately, this ordinance was not tightly written nor do the constructions costs written into the 2005 ordinance based on market conditions existing 12 years ago reflect costs today even though the costs in the ordinance are indexed (based on the Consumer Price Index in the Washington, D.C. region).

Over the 12 years of the ordinance, developers choose largely to not provide new affordable units on site, but rather pay the modest fee above that amounts to a portion of the actual cost of the new apartment. During 2005-October 2014 (about 10 1/2 years), developers only provided 11percent of required units on site (30 units of the required 295 units), and instead paid a rather modest fee of $137,000 per unit, far below the cost of adding a new unit offsite. These fees were added to the AHIF (Affordable Housing Investment Fund).
The county board should increase the required fees under the ordinance to reflect the actual contemporary cost of a new apartment which is at least $350,000 per new unit. A developer should pay a fee of at least $350,000 per unit or provide a unit on site. A fee of $350,000 paid per unit would generate an estimated $7 million more annually for the housing program. Developers exacerbate the problem of rising rents in our community by their activities, and it is fair to shift some of the tax burden of housing assistance programs to them rather than to only general taxpayers.
During 2005-October 2014, a total 295 additional units were approved under this ordinance, of which only 30 units were located in the new developments, whereas developers choose to pay a fee for the 265 units not provided in the new developments. Thus, this ordinance applied to an average 30 new units per year. These fees yielded only $36.2 million during the 10 years or $3.6 million annually, the equivalent of $137,000 per new additional apartment. These funds were simply added to the AHIF.
These Affordable Housing Ordinance fees cited above should be tripled on a square footage basis. This would be expected to increase the average fee received per unit from the current $137,000 to $350,000. With a fee paid of $350,000 per unit for 30 units, the county would likely receive $10.5 million annually, an increase of $6.9 million a year from the current $3.6 million. This entire additional $6.9 million annually should be placed in the housing grants fund.