To: Honorable Mayor and Members of City Council
From: Molly Rattigan, Community Resources and Development Director
Prepared By: Molly Rattigan, Community Resources and Development Director and Stephanie Gaul, Housing Manager
TITLE:
Title
Deed Restricted Affordable Housing Impact and Building Fee Reduction and Waiver Program
LABEL
RECOMMENDED ACTION:
Recommendation
1. Adopt a resolution updating City Fees and Charges related to Residential Building Permit Applications for Affordable Housing Units and New Accessory Dwelling Units of 749 Square Feet or less; and
2. Adopt a resolution updating City Fees and Charges related to impact fees for Affordable Housing Units; and
3. Authorize the Director of Community Resources and Development to enact and administer an Impact and Building Fee Reduction and Waiver program to encourage the rapid development of deed restricted affordable housing.
Body
DISCUSSION:
Background
The City of Napa is three years into an eight-year Regional Housing Needs (RHNA) cycle and is currently underperforming in meeting the Low- and Very Low-Income housing production goals. There are also very few projects in the pipeline that are nearing construction, while several projects remain “stuck” as they work to secure the financing needed to move forward. The chart below illustrates the City’s current RHNA performance:
|
Income Level |
RHNA Need |
Completed Per State Report |
% Completed |
In Progress |
Awaiting Financing |
|
Very Low |
770 |
15 |
2% |
0 |
400-500 |
|
Low |
444 |
94 |
21% |
25 |
|
Cities that fail to make significant progress toward housing production goals could begin to face land use and regulatory consequences. The City’s current underperformance in one or more income categories places the City at risk of State intervention.
At the same time, cost continues to be one of the greatest challenges facing affordable housing projects. Reducing development costs and providing additional incentives can help address funding gaps, improve project feasibility, and move projects from the pipeline into construction.
In an effort to advance the same goals, the State of California recently passed AB 179. While implementation details are still pending, the legislation created a stronger incentive for cities and counties to waive or reduce local development impact fees for affordable housing projects seeking state funding. Beginning with funding opportunities issued after July 1, 2027, qualifying fee waivers, reductions, and deferrals will be considered as local contributions in the state funding process. For certain projects where the local government is the lead applicant, failure to waive applicable development impact fees could result in a corresponding reduction in the state award. The legislation is intended to reduce affordable housing development costs and encourage greater local participation in project financing.
Building Permit Fee Reduction or Waiver
The proposed resolution regarding Building Permit Fees would provide fee discounts or waivers to projects that provide income-restricted affordable housing to households earning at or below 120% of Area Medial Income (AMI). The purpose of this program is to address funding gaps in affordable housing projects, incentivize the development of affordable housing units that advance the City’s Regional Housing Need Allocation (RHNA) goals, and provide a local contribution that may be recognized as matching funds for other affordable housing funding sources. The program would apply to the following fees:
• Residential and Multifamily Uses (City of Napa Fee Schedule 2.1.6-2.1.10)
• Single Family Dwellings - Plan Review & Inspection (City of Napa Fee Schedule 2.1.26-2.1.30)
• Accessory Dwelling Units (City of Napa Fee Schedule 2.1.36)
The City of Napa currently provides a 50% fee discount for certain Building Permit Fees for units that are deed-restricted to households earning 120% of Area Median Income or less, or are an accessory dwelling unit of less than 500 square feet. The proposed resolution rescinds the City Council’s prior action and replaces it with the following Building Fee Waiver Schedule:
• 100% waiver of specified building permit fees for units deed restricted to households earning at or below 50% of Area Median Income (AMI).
• 75% reduction of specified building permit fees for units deed restricted to households earning between 51%-80% of Area Median Income (AMI).
• 50% reduction of specified building permit fees for units deed restricted to households earning between 81% to 120% of Area Median Income (AMI).
• 50% reduction of specified building permit fees for an accessory dwelling unit (ADU) that is 749 square feet or less and not deed-restricted.
• For projects that include units restricted to different income levels, the fee waiver will be calculated based on the applicable per unit building permit fee for each income restricted unit or a percentage of total project square footage.
Impact Fee Reduction or Waiver
The proposed resolution regarding Impact Fees would provide fee discounts or waivers to projects that provide income-restricted affordable housing to households earning at or below 80% of Area Medial Income (AMI). The purpose of this program is to address funding gaps in affordable housing projects, incentivize the development of affordable housing units that advance the City’s Regional Housing Need Allocation (RHNA) goals, and provide a local contribution that may be recognized as matching funds for other affordable housing funding sources. The program would apply only to the following Impact Fees:
• Fire and Paramedic Development Impact Fee (NMC § 15.78)
• Street Improvement Fee (NMC § 15.84)
• Park Development Fee (NMC § 15.68)
• Park Land Dedication Fee (NMC § 16.32.040)
• Specific Plan, Street, Traffic or Park Impact Fees for Certain Geographical Areas (NMC §)
o Orchard Avenue Area Park Fee (15.72)
o North Jefferson Park and Street Improvement Fees (15.76)
o High Priority Improvement Payback Fee (15.88)
o Big Ranch Specific Plan Area Development Impact Fee (15.98)
o Lone Oak Drainage Fee (15.100)
The Impact Fee Resolution proposes the following Impact Fee Schedule:
• 100% waiver of specified impact fees for units deed restricted to households earning at or below 50% of Area Median Income (AMI).
• 75% reduction for specified impact fees for units deed restricted to households earning between 51%-80% of Area Median Income (AMI).
• For projects that include units restricted to different income levels, the fee waiver will be calculated based on the applicable per unit fee for each income restricted unit or as a percentage based on the percentage of deed restricted square footage as part of total project square footage, dependent on the structure of the fee assessment.
Note: State law currently waives certain impact fees for Accessory Dwelling Units under 750 square feet.
General Eligibility and Project Qualifications for Fee Discounts or Waivers
In general, the following eligibility and project qualifications will apply to both Building Permit and Impact Fee discounts or waivers:
• Unless otherwise specified by a State or Federal grant or loan program, projects receiving a fee waiver must utilize the annual income limits published by the State of California Department of Housing and Community Development (HCD) for the applicable affordable housing income thresholds.
• Projects must be evidenced by a deed restriction for a period of no less than 55 years for rental housing and no less than 45 years for for-sale housing.
• Projects must apply for or obtain a building permit between July 1, 2026 and December 31, 2028.
• Eligible units must qualify for reporting toward the City of Napa’s Regional Housing Need Allocation (RHNA) Annual Performance Report.
• The fee waiver or reduction would not apply to units constructed as part of an alternative equivalent to payment of the Affordable Housing Impact Fee, as determined pursuant to Napa Municipal Code Section 15.94.070.
• There is no limit to the number of units that can receive a fee discount or waiver for Building Permit fees for Building Permits applied for or issued between July 1, 2026 and December 31, 2028.
• The Impact Fee reduction or waiver may be applied to a maximum of 250 Very Low Income Units and 250 Low Income Units that apply for or receive building permits between July 1, 2026 and December 21, 2028. For purposes of limitations on units receiving the Impact Fee, the reduction or waiver will be available at the time of building permit applications and approval from the Community Resources and Development Director that no other financing gaps exist.
FINANCIAL IMPACTS:
If approved, this program will have a financial impact on various Impact Fee Funds as well as the General Fund for Building Permit Fees.
The estimated financial impact to the Impact Fee Funds based on the Maximum Number of units allowed is as follows:
These impacts have been reviewed with the relevant Department Heads who have expressed their support for the program.
The estimated impact to the General Fund due to the Building Permit Fee Reductions or Waivers is between $500,000 and $750,000 combined for the 3-year term of the fee reduction and waiver program. The financial impact to the General Fund may be overestimated considering this work may not happen without these fee reductions.
Specific possible impacts will be presented at the City Council meeting on September 15, 2026.
CEQA:
The Community Resources and Development Director has determined that the Recommended Action described in this Staff report is not subject to CEQA, pursuant to CEQA Guidelines Section 15060(c).
DOCUMENTS ATTACHED:
ATCH 1 - Resolution (Building Permit Fees)
ATCH 2- Resolution (Impact Fees)
NOTIFICATION:
None.