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Report regarding a request by the South San Francisco Housing Authority to partially waive Building and Fire Permit fees for their C Street Housing Complex Electrification Project. (Nell Selander, Director of Economic & Community Development)
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RECOMMENDATION
Recommendation
Staff recommends that the City Council consider the South San Francisco Housing Authority’s request to partially waive Building and Fire Permit fees for their C Street Housing Complex Electrification Project. Staff has prepared the associated Resolution implementing the fee waiver for City Council consideration.
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BACKGROUND
The South San Francisco Housing Authority (“Housing Authority”) owns and operates 80 public-housing units on an 8.3-acre parcel on C Street in South San Francisco (known as “the C Street Housing Complex” or “the Complex”). The Complex includes 38 duplexes and triplexes adjacent to the Housing Authority’s office, which is located at 350 C Street.
Due to the age of the buildings, with some dating back to the 1940s, the Housing Authority is pursuing an electrification project (“the Project”) to modernize the Complex with fully electric utilities and appliances to improve resident safety and sustainability. In 2024, the Housing Authority was awarded a $3,030,240 Housing-Related Hazard Capital Fund grant by the U.S Department of Housing and Urban Development (HUD) for the Project to address carbon monoxide. Removing gas appliances and replacing them with electric is an eligible expense.
Since the grant was awarded, the Housing Authority has designed the Project but has not bid out the work. As such, they do not have firm understanding of the cost of the electrification of all 80 units and offices at the Complex. Currently, their project manager estimates construction costs at $35,000 per unit or $2,835,000 total if the office is included, with the remainder of the grant award paying for project management and other soft costs.
The Housing Authority is requesting that the City partially waive Building and Fire Permit fees associated with the Project. Although the Housing Authority has yet to submit an over-the-counter Building Permit application or Fire Construction Permit for the Project, City staff estimate the fees due are likely to total $111,883.06 based on the City’s 2026-2027 Master Fee Schedule. This estimate equates to $1,381.27 in fees per unit if the office is included. The waiver of these fees is subject to City Council approval. If Council waives these fees, the Fire Department will incur roughly $15,000 in direct costs for consultant work that the City would have to absorb. Attachment 1 includes a table with a breakdown of the fees.
In addition to the Building and Fire Permit fees discussed above, Business License Taxes are also due on construction projects at Building Permit issuance. Those taxes, which were approved by South San Francisco voters in 2024, cannot be waived. The Business License Tax estimate for the Project is $5,103.00 and will be due at the time of Building Permit issuance, even if the City Council takes action to waive the Building and Fire Permit fees.
DISCUSSION
In recent years, affordable housing developers have increasingly asked the City to reduce impact fees, such as the Citywide Transportation, Parks, Childcare, Library, and Public Safety Impact Fees to offset the rising costs of housing development. For many years, the City did not waive these impact fees, but has increasingly done so, as affordable housing funding becomes more scarce and few other subsidies are available. In the past year, the City Council has approved impact fee waivers for the following 100% affordable housing projects: 1051 Mission Road (Related California) and 500-522 Linden (Rotary-Beacon). Additionally, the State recently passed AB179 that restricts local development impact fees on residential projects and modifies grant program guidelines to favor jurisdictions who more proactively waive fees for affordable housing projects.
Despite a growing precedent of impact fee reductions, Building Permit fee waivers such as those requested by the Housing Authority are exceptionally rare in the City’s history. The only examples of City Building Permit fee reductions in recent years are a 20% reduction in 2018 for the 200 Linden housing project and a full fee waiver in 2025 for the Oyster Point Marina West Basin Access Improvements project. City Council at the time granted these waivers due to the 200 Linden project being eligible to receive the same reduction under State Density Bonus law and the Oyster Point Marina being a City-owned asset in partnership with the Harbor District.
Building and Fire Permit fee waivers have specific fiscal implications. Firstly, there are direct costs associated with the Building and Fire Permit inspections, namely, staff and contractor time. These direct costs are studied every three to five years as a part of the City’s user fee studies to determine the appropriate corresponding fee charge, which is then only adjusted for inflation during the intervening years. The second is that there is no sustainable replacement funding source eligible to fund the full spectrum of projects the City permits. Special purpose City funds, like the City’s Housing Trust Fund, generally carry defined eligible use restrictions that make identifying a single or even a select few replacement funding sources for Building Permit fees in a systematic way impossible. Even for specific use categories such as affordable housing, staff must closely analyze project details to determine which fund is appropriate for a project. The third is the risk of potential precedent setting. Specifically, there is a risk that should the City grant the Housing Authority a Building and Fire Permit fee waiver, in the absence of a legal or ownership reason to do so, developers may begin assuming Building and Fire Permit fees are now negotiable with the City. This could have long-term implications for the financial sustainability of the City’s plan review and inspection programs.
Notwithstanding the potential fiscal implications, waiving Building and Fire Permit fees for the Project will likely benefit the residents through ameliorated indoor air quality, reduced risk of utility failures such as gas leaks, and bolstered fiscal and environmental sustainability. These are noteworthy improvements for public housing residents, given chronic Federal funding shortfalls for public housing properties. Moreover, HUD requires housing authorities to rent units only to low-income households and to cap rents at 30% of the household’s income. This rent cap is irrespective of how limited a household’s income may be. This makes public housing one of the last truly affordable options for extremely low-income households; the average public housing household in California pays $595 in rent and has an average annual income of $26,879.
The Housing Authority has indicated that their Project may accommodate a more modest Building & Fire fee in which the City’s per unit fee estimate of approximately $1,381.27 is assessed on a per building basis instead. Given that there are 38 buildings, the Housing Authority proposes paying approximately $52,488.26 in Building & Fire fees. In this scenario, the City would be waiving approximately $59,394.80 in Building & Fire fees to cover the difference between the Housing Authority’s proposal and the standard per unit rate of approximately $111,883.06.
FISCAL IMPACT
Based on the City’s current understanding of the Project, the approximately $59,394.80 Building and Fire Permit fee waiver would impact the City’s General Fund, as it is a user fee that directly offsets staff and contractor costs associated with providing the plan review and inspection services. As discussed above, the Fire Department estimates it will incur $15,000 in contractor costs associated with reviewing and inspecting the project. Utilizing the Commercial Linkage Fee Fund (Fund 823) to charge these direct costs, as housing rehabilitation for low-income households is an eligible use of the Fund and an option available to the City Council; however, staff would need to prepare a grant or loan agreement and monitor the Project performance and incomes at the Complex.
Additionally, staff would recommend that the proposed fee waiver applies only to the scope of work and estimated fees currently identified in the report and understood from discussions with Housing Authority staff. Any future, omitted, or additional scope of work not presently contemplated-including work resulting from required electrical service or panel upgrades-would not be included in the Council’s current waiver consideration and would remain subject to the applicable permit fees and other associated costs.
RELATIONSHIP TO CITY COUNCIL PRIORITIES ACTION PLAN
Approval of this action aligns with the major focus area of Housing and Supportive Services, which is focused on encouraging a balanced housing supply. It also aligns with the Infrastructure and the Environment major focus area by addressing air quality and climate concerns.
Disapproval of this action would also contribute to the City’s Strategic Plan - Modern and Sustainable Organization - ensuring fiscal sustainability by requiring directly-related city costs be recovered according to its established fee schedule.
CONCLUSION
Staff recommends that the City Council consider the South San Francisco Housing Authority’s request to partially waive Building and Fire Permit fees for their C Street Housing Complex Electrification Project. Staff has prepared the associated Resolution implementing the fee waiver for Council consideration.
Attachments:
1. Building and Fire Permit Fee Breakdown