Accessory Dwelling Unit Impact Fee Calculation

In July of 2017, I wrote my first RCS article about Accessory Dwelling Units (ADUs) in which I merely identified the differing types of ADUs.  In November of that year I wrote about the lack of municipal service demand information about ADUs needed to calculate an empirical stand-alone ADU development impact fee (DIF). In lieu of that, I suggested that the ADU impact fee would best be addressed by making it a function of a Detached Dwelling, or SFR for those of you that do not see the irony of continued use of phrase.  My more than thirty years of undertaking DIF calculations made me conclude that it was within the reasonableness requirement of existing law in Government Code §66000.

The State legislature, in its inimitable style, came up with a similar idea, but in the most dysfunctional way possible.  Keep in mind that the State legislature is not a big fan of DIFs, seeing them as an obstacle to their belief that getting ADUs approved easily will significantly help the State with the housing crisis.  The state concluded that should ADUs be approved (Oh, excuse me, you pretty well have to approve them), impact fees would be limited to ADUs greater than 750 square feet and they must be proportional to the primary unit (i.e. the big house out in front).  In short the State feels that your municipal agency should simply absorb those into your municipal service delivery system.  The new ADU legislation (Section 65852.2. (D) (3) (A) of the Government Code) states:

(3) (A) A local agency, special district, or water corporation shall not impose any impact fee upon the development of an accessory dwelling unit less than 750 square feet. Any impact fees charged for an accessory dwelling unit of 750 square feet or more shall be charged proportionately in relation to the square footage of the primary dwelling unit.

I’m going to digress a moment.  Many thanks to the legislature for increasing the City’s new infrastructure demands from new residential structures less of than 750 square feet by exempting them. This is a nice new unfunded State-Mandated Programs candidate if I have ever seen one.  Sure, why not? Cities can just “absorb” that new demand, no problem at all.  It appears that State officials find it difficult to comprehend how the new demands of a number of “small” ADUs could have any significant impact on existing City service levels and many suggest that the added demand could simply be absorbed. However, consider if 200 ADUs, each having an average of 1.25 residents, were constructed over a span of five years, this would add 250 new residents to the City’s population.  This population increase from 200 ADUs is the equivalent population resulting from the construction of 68 new detached dwellings, at an average of 3.7 persons per detached dwelling.  No one would suggest out loud that the City could simply “absorb” the demands of a new tract consisting of 68 new detached dwellings. Or at least let us hope it never gets to that point.  To summarize, 750 square feet has an Impact, but 749 square feet has no impact.  Priceless!

I’m done digressing and I’m moving on to the use of “the primary residence” and the bigger issue of fairness and equity of impact fee application.  City X has received two identical 750 square foot ADU applications, one on a lot with a 1,875 square foot primary residence and one with a 3,000 square foot primary residence.  City X already has a detached dwelling unit impact fee of $25,000 per unit. If you haven’t already seen what’s coming, the inequity is clearly identified in the following calculation:

Sq Ft of Proposed ADU 750 750

Sq Ft of Primary Dwelling 1,875 3,000

ADU as % of Primary Dwelling 40% 25%

Detached Dwelling Unit DIF $25,000 $25,000

ADU Development Impact Fee $10,000 $6,250

There it is…. two very different impact fees for two identically sized ADUs.  The identical 750 square foot ADU with the 1,875 square foot primary detached dwelling unit has a 60% higher fee than the identical 750 square foot ADU on with the larger primary detached dwelling unit.  While we all may agree it is difficult to determine the true empirical impact of an ADU on city infrastructure, we certainly can all agree that the impact for two 750 square foot ADUs would be the same.  Any distinction otherwise is simply absurd and is clearly not reasonable.

The fix?  My suggestion would be to use an average detached dwelling square foot size.   According to data received from Census data a typical dwelling unit in the United States is 2,616 square feet exclusive of a garage (United States Census Bureau Quarterly Statistics, Table Q1, First Quarter, 2017).  If the $25,000 were to be divided by the 2,616 square feet, a cost of $9.56 per square foot is determined.  When applied to new ADUs, each 750 square foot ADU would have an equal impact of $7,170.  End of inequity.