SB 937 Would Lower Finance Costs for New Homes – Heads to Governor’s Desk

Photo bySandy MillaronUnsplash

On Wednesday, the California State Legislature passed SB 937, a bill authored by Senator Scott Wiener of San Francisco aimed at reducing housing construction costs by changing the timing of when local jurisdictions collect impact fees on new homes. The bill, co-sponsored by California YIMBY, the California Housing Consortium, and the Housing Action Coalition, now awaits Governor Gavin Newsom's signature.

Under current regulations, most local jurisdictions in California require homebuilders to pay various impact fees when they apply for building permits. These fees cover costs for local services, including administration, inspections, schools, parks, libraries, and other amenities. Depending on the jurisdiction, these fees can be substantial, reaching up to $150,000 per home in some cases.

The collection timing of these fees significantly impacts the final cost of housing. If fees are collected when homes are first permitted, builders must finance these fees with high-interest construction loans. This process can add tens of thousands of dollars to the overall cost of a new home. SB 937 seeks to address this issue by allowing the collection of impact fees to be delayed until homes are built, enabling builders to cover these costs with rental revenues or mortgage loans, which typically have lower interest rates than construction loans.

“Giving homebuilders more flexibility to build housing is a win for all Californians,” said Senator Wiener. He emphasized that the bill would help remove unnecessary financial barriers to housing development. “I’m thrilled to see progress to ensure impact fees provide the least obstructions possible for housing development."

Housing advocates and organizations have voiced strong support for SB 937, recognizing the bill's potential to ease the financial burden on developers and promote more housing construction. Brian Hanlon, CEO of California YIMBY, highlighted the importance of understanding the impact of housing fees on overall costs. "By making this subtle shift in housing finance, SB 937 will lower the costs of new homes, while still allowing local jurisdictions to collect the fees they use to fund local services. It’s a win-win," he said.

California continues to face a severe housing shortage, with construction costs, high-interest rates, and restrictive local regulations adding to the problem. Local impact fees are often so high that they can delay or even cancel essential housing projects. By allowing builders to pay these fees later in the process, SB 937 could save tens of thousands of dollars in financing costs for new homes without reducing local revenues.

“We have to do everything we can to reduce housing costs, and SB 937 is an important step,” said another housing advocate. The bill represents a broader effort to address the state's housing affordability crisis by reducing construction costs and encouraging more homebuilding.

With SB 937 now headed to the Governor’s desk, stakeholders are hopeful that this measure will be a meaningful step toward lowering housing costs in California and making it easier for developers to bring new homes to market.