HIP Tool: Commercial Linkage Fees

Commercial linkage fees are a form of impact fee assessed on new commercial developments or major employers based on the need for workforce housing generated by new and expanding businesses. Revenues generated by the fee are then used to help fund the development of affordable housing opportunities within accessible commuting distance to the employment center.


Background

Commercial linkage fees build upon the relationship between commercial and residential development. They hinge on balancing the impact of growth in non-residential development by stimulating affordable residential development for workers or supporting demand for services.

Linkage fee schemes vary by the type of commercial development (generally office, hotel, retail, or industrial). Different development types may be charged separate rates per square foot of development, due to their differing levels of impact. A threshold size of development may also be established to exempt smaller developments. Linkage fees may be structured to devote a percentage of the fee specifically to different public benefits, for example, a $3.50 per square foot fee with $3 benefiting affordable housing and $0.50 supporting open space. Setting the correct fee level requires analyzing the types of jobs the development will create and the affordability of housing within a reasonable commuting distance of the development. If, for example, a development will create or stimulate lower-paying service sector employment, the linkage fee may need to be higher to close the larger gap between income and nearby affordable housing. If the development will create higher paying jobs, in technology or engineering, for example, the linkage fee may be smaller. The size of the fee will also vary by jurisdiction, with more expensive markets having larger commercial linkage fees.

This tool requires a vibrant development climate to succeed. Depending on your community’s needs, the fees collected can be applied to any type of affordable housing proposal or district. Commercial linkage fees can serve as a designated revenue stream for a local housing fund.

Tool Profile

Focus Areas

  • Urban Centers
  • Expensive Housing Markets
  • Innovative Single Family Techniques

Project Types

  • Single Family
  • Multifamily
  • Ownership
  • Rental
  • Subsidized

Affordability Level

  • 80 to 120% AMI
  • Less than 80% AMI

Housing Goal

  • Affordability