Community Development Department
Reference: Accessory Dwelling Unit Fee Reductions & Missing Middle Housing Code Amendments
To: Mayor Gregory Mills and Members of City Council
Through: Michael P. Martinez, City Manager
Prepared By: Shawn Weiman, Affordable Housing Coordinator
Date Prepared: October 1, 2025
PURPOSE
To present findings and recommendations from a study of impact fees charged for accessory dwelling units (ADUs) with the goal of further implementing the Housing Needs Assessment (HNA) strategy for adding infill housing. Also presented for discussion are two additional housing matters: incentivizing lower-cost market-rate housing and potential Land Use & Development Code (LUDC) amendments affecting middle housing.
BACKGROUND
ADU Impact Fees
Promoting ADUs as an effective strategy for increasing housing supply has been identified in recent state legislation and the HNA. Funds from the Proposition 123 Local Planning Capacity grant program have been secured for studying the impact of ADUs and how to decrease the cost of adding ADUs. Some City impact fees charged for ADUs are currently the same amounts charged for principal dwellings. Gruen Gruen + Associates was engaged to perform research and make recommendations regarding the impact fees charged for ADUs.
Incentivizing Lower-Cost Market-Rate Housing
The HNA list of strategies includes “encourage housing production at all levels and reduce housing production costs.” One tactic often considered when approaching this strategy is right-sizing impact fees, or in other words, charging impact fees based on the project building size or valuation. Right-sizing comes with logistical challenges. City staff was asked to evaluate an alternative strategy of discounting impact fees for smaller homes. This similarly comes with complications; however, expanding on the idea introduces a way of directly incentivizing the desired outcome without involving fees: providing a monetary incentive after closing to the builder of a new home that is sold under a determined price.
LUDC Amendments Affecting Middle Housing
LUDC amendments could be drafted that address how zone districts, land uses, and building types currently conflict or limit the reasonable development of varied uses and buildings, predominately “middle housing” types. (Middle housing describes housing types between single-unit detached homes and mid-rise apartments, and include duplexes and townhomes.) For example, the LUDC allows certain uses in specific zone districts; however, corresponding building types do not appear on various tables that outline lot design and other criteria. This specific instance occurs where certain housing types are allowed in the South 4th Avenue overlay district, though since they are not allowed in the underlying C-1 zone district, they are not recognized as being allowed in the non-residential development standards table.
STAFF ANALYSIS & RECOMMENDATIONS
ADU Impact Fees
ADUs provide efficient housing solutions for young adults forming their first households as well as senior residents looking to down-size. Also, market-rate for-rent ADUs add to housing inventory at price points affordable to 80% and lower area median income work-force residents.
The park related, transportation, and general services impact fees charged for ADUs total $8,625. In addition, plan review & permit fees and use tax are charged for ADUs based on the project valuation and are likely to bring the total fees to over $15,000. Assuming there is no increase in service size for water and wastewater impacts, fees are not charged, neither is a stormwater fee, and fire and school district fees are charged at lesser multi-unit rates. Of the five ADU permits applied for in 2024, three were not pulled by the applicants due to the amount of impact fees. Two ADU permits are in process year to date.
The projected number of added ADUs combined with their minimal impact to existing infrastructure pose little burden on city services. Making ADUs more affordable to construct contribute to achieving the goals identified in the HNA and promoted by the state. Staff, therefore, recommends that park, transportation, and general services impact fees not be charged for ADUs, and that a pre-approved plan program concept be studied.
Incentivizing Lower-Cost Market-Rate Housing
Staff recommends developing the concept of providing a monetary incentive to increase the supply of lower-cost new homes by considering the appropriate sales price threshold, amount of the incentive, and administrating the process.
LUDC Amendments Affecting Middle Housing
The proposed LUDC amendments correct matters as well as streamline the code structure where zoning districts allow certain uses, uses allow certain building types, and building type determines setbacks. This organization would be more effectively applied, allow a variety of housing types in appropriate settings, and may reduce the probability of new developments utilizing planned developments which add to entitlement costs and planning staff workload.
Staff would like direction on whether or not they should proceed with drafting code amendments and bringing them to public hearings before the Planning Commission and the City Council in the near future.
ATTACHMENTS
● Draft PowerPoint Presentation