A linkage fee program is established by local legislation and administered by city staff. The local agency that issues building permit applications and zoning variances typically collects the fees and ensures that developers are in compliance. Fees are usually directed into a housing trust fund or the general budget.

Once a linkage fee program is in place, it will produce funds for affordable housing and community needs without much further action, though advocates should maintain support for it and monitor the expenditures.

Build a Community of Support

Getting a linkage program passed usually requires mounting a campaign with a broad base of support. Since a linkage program requires legislation, the mayor and city council will likely be the targets of the campaign. In some cities, it is also important to target city staff, as elected officials rely on them for information and advice. In others, the city staff may not be players. Those who know the politics of a municipality should be able to predict which is the case.

A broad base of partnerships and allies is also critical for building an effective campaign. A linkage campaign should include citizens, sympathetic government officials, planning and development experts, and as many community organizations as possible that represent housing and any other needs the linkage program will address. Sympathetic business people are also an asset. (See Keys to Success.)

Develop a Proposal

One of the most important elements of a linkage campaign is a well-thought-out proposal. A general call for some sort of linkage fee opens the door for opponents to declare that it will result in the death of all commercial development. However, with a specific proposal in hand, advocates can make a coherent argument-with hard data-that outlines the benefits of the policy and the limited impact on developers.

Advocates should, however, be prepared to be flexible about their proposal. A sympathetic mayor may convene a commission to recommend the actual details. Compromises may be necessary in order to retain allies or garner key supporters. Nonetheless, the more research that has gone into the proposal, the better chance it will be winnable.

Consider Program Design

The basic concept of all linkage fee programs is the same: developers of new commercial structures contribute-either by fee or through construction-to the affordable housing stock or to other community needs such as job training, public transportation, or child care. Beyond this basic concept, there are significant variations, shaped by a range of political and economic issues.

Development Type.  The first step is determining the types of real estate development to which the fee will be applied. Most linkage programs apply to some subset of "commercial" development (in zoning this usually refers to office, retail, and hotel space). Some programs also assess a fee on new industrial development, though usually at a lower rate.

In choosing real estate categories, consider the current and projected economic profile of the city. What sorts of economic development are happening, and at what rates? Are there a lot of zoning variances being requested? (Often local or regional planning departments/agencies have this information.) If office space is projected to boom, for example, but there is an over-saturation of hotel rooms, focusing the fee on new office development might make sense.

Rate.  Virtually all linkage fees are charged per square foot of the new development. While some ordinances have the same fee for all categories of use (retail, office, etc.), others set separate rates. Proponents of a linkage program should relate the proposed fee per square foot to the increased affordable housing need generated by the new commercial development.

To show this relationship, proponents must first determine the number of new affordable units needed. For example, in the Chicago area, the regional planning agency projected that every 100 jobs added to an area already short on affordable housing generates a need for 15 additional affordable housing units within a reasonable commuting distance. A professional planner can help with such calculations.

Next, proponents need to estimate the cost of financing the "gap" between the cost of constructing a new unit and the affordable sale (or rental) value based on the income of the target population (the workers in need of housing). State affordable housing programs can help with this by sharing the methods they use to determine needed subsidies. In New Jersey, for example, the Council on Affordable Housing set the per unit "gap" cost at $25,000, based on actual program costs and the average internal subsidy required for affordable units in a mixed-income development.

Payment Timing.  Another important issue is when in the construction process the developer pays the linkage fee. In some cities, including San Francisco, the fee is due when the new development receives the permit. In Boston, the payment can be spread out over a period of seven years.

Fee Review. Many linkage fee ordinances include a provision that allows or mandates a periodic review of the fees to determine whether an adjustment is needed. Given inflation and changing economic conditions, including a call for regular review of the fee schedule is important.

Use of Funds.  The core concept of linkage programs is to mitigate the impact of commercial development on housing affordability. But several municipalities have also looked to linkage fees to address other needs, such as childcare and job training.

To determine whether a linkage program should go beyond housing, explore whether a new development might create other needs. Will local residents need job training to get access to the new jobs?  Will the new commercial development increase traffic enough to warrant increased investment in public transportation options? How do these compare to the affordable housing needs? Consider political allies and coalition opportunities.

Proximity Requirement.   Some municipalities include a proximity requirement in their linkage programs to ensure that the affordable housing built with the funds is in the area affected by the commercial development. For example, in Boston, the housing is supposed to be built within a mile and a half of the commercial development that generated the funds.

Exemptions.  All linkage programs exempt a certain amount of square footage from their fees, as a way of protecting small businesses. The threshold depends on the priorities and concerns of the program. When Boston established its program, the priority was on addressing the effects of large-scale commercial developments, so it set a high threshold. Developments under 100,000 square feet do not owe a fee at all; for larger developments the fee is levied only on the square footage above 100,000. Cambridge, on the other hand, exempts developments under 30,000 square feet completely, but charges larger developments for all but 2,500 of their square footage.