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Commercial Development in San Diego Gets More Expensive

The San Diego city council voted this week to increase the fees it charges commercial developers by nearly five times over the next three years, significantly increasing the city's take on commercially zoned projects within the city. The move is part of a broader effort to increase the amount of affordable housing in the area. The vote followed party lines, with the council's five Democrats voting in favor and its four Republican members opposing. The measure will increase so-called "linkage fees", which developers pay to the city when they undertake commercial projects.

The idea behind this week's raising of linkage fees is that commercial development creates demand for low-paying jobs, which in turn creates a need for affordable housing. Under the new rules, linkage fees would vary depending on the project, and based on the number of low wage positions the project would create. A large, retail outlet, for example, would be required to pay a higher linkage fee than a medical facility, which would not create as many low wage positions as the store. Opponents of the move claim that the new fees will cause San Diego to lose projects, as developers opt for nearby communities with lower linkage fees.

San Diego's linkage fee for commercial development dates back to 1990, when it was set at 1.5 percent of total project cost. The rate was cut in half, however, during the economic downturn of the mid-1990s, and has not been adjusted since. The rate will now return to 1.5 percent for projects started this year, and go up from there in each of the next three years. Projects already underway, and completed before next July, will be exempt from the higher fees.

November 5, 2013