SAN DIEGOSAN DIEGO — San Diego’s recent campaign to accelerate approvals of new housing and other projects is coming with a price tag: developer fee increases to cover additional city workers, new technology and other efforts.
This week, the City Council approved a sweeping new fee structure for the Development Services Department that aims to boost the department’s annual revenue by $15.6 million, from $113.1 million to $128.7 million.
While a consultant’s analysis says the hikes are warranted and will only cover the city’s costs, local developers and the business community are raising concerns.
They say the fees will make housing more expensive during a particularly bad affordability crisis. They also question the validity of the consultant’s analysis, which relied on only one year of data because of the pandemic.
The San Diego Regional Chamber of Commerce stressed that long delays in securing permits are still common and suggested the increases should come with caps on how long approvals take and refunds when there are delays.
“We believe additional revenue should be paired with additional ability,” Evan Strawn, a policy adviser for the chamber, told council Tuesday before they voted 9-0 to approve the fee increases.
Councilmember Kent Lee, who leads the council’s Land Use and Housing Committee, said he shared the business community’s concerns about higher fees making housing more expensive at the wrong time.
But Lee noted that recent city innovations, such as guaranteeing any approvals for subsidized housing projects within 30 days, are badly needed and come with a cost.
“It’s important that we have fees that ultimately reflect the full cost of the services we provide,” Lee said.
Other recent changes include online appointments, an upgraded call center to reduce hold times, completely digital permits and accelerated approvals for accessory dwelling units and renovations at life-sciences facilities.
Those efforts helped boost the number of permits issued last year to 75,000 — up 9 percent from 2022. But they also require more workers.
The number of employees working for the department has risen by nearly two-thirds — from 393 to 647 — since the last time the city conducted a fee analysis in 2016. The department’s job vacancy rate, which had been between 20 percent and 30 percent for years, is now 7 percent.
In addition, most city employees recently got incremental pay raises that are still kicking in but will amount to roughly 25 percent over three years.
The consultant, MGT Consulting, concluded that the department has been charging fees that are 12 percent too low overall.
But not all fees will increase by 12 percent. MGT’s analysis showed that some fees were too low but that some others were too high.
It also said San Diego charges too many different types of fees, so the increases came with a consolidation of many fees. Along with approving the increases, the council slashed the types of fees charged by the department from 538 to 313.
Under the changes, the permit cost for a 500-square-foot ADU rises from $1,484 to $2,885. For a 3,000-square-foot house, the fee rises from $4,925 to $6,640.
The new fee structure also shifts to a per-hour formula. The city will now charge an applicant $145 per hour for staff time, an amount the consultant chose based on analyzing how much time typical tasks take.
Because the department accumulated 887,000 staff hours in 2023, it is estimated the $145 hourly fee will generate $128.7 million annually.
Along with the increases for developers, the council approved sharp fee hikes for the owners of historic homes seeking property tax reductions under California’s Mills Act. Application fees for Mills Act designations are rising from $471 to $1,305.
The city will also start charging $1,000 for appeals of historical resource designations, but owners of properties that have been designated historic against their will can still appeal for free.
Those changes come as the city begins exploring a significant revamping of its historic designation policies, partly to reduce how often those designations block new housing projects.
