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Linkage fees

Linkage fees “link” other forms of development with a community's needs for affordable housing. Linkage fees are typically charged to developers and then spent on affordable housing preservation or production through existing housing programs. Linkage fee ordinances are one way to leverage private markets to produce affordable housing, fund homeownership programs, or preserve existing affordable rental housing.

Linkage fees help meet a housing need that may be produced when new development occurs. For instance, the development of an office or retail complex in a station area will bring many employment opportunities to the area, including minimum wage jobs that may not pay enough so that a household can work and live in the same community – or even a nearby community that is connected to the workplace by affordable transit. Linkage fees, most often charged to developers on a square foot basis, can then supplement an affordable housing funding program that targets station areas.

Case Studies

Boston, Massachusetts

Grassroots and tenants groups began pushing for a linkage fee in Boston in 1983 and the city began collecting the fee in 1984, despite legal challenges that required the Commonwealth of Massachusetts to pass legislation allowing the fee to be implemented. It applies to all new commercial developments over 100,000 square feet that require zoning relief and the funds go to the Neighborhood Housing Trust and the Neighborhood Jobs Trust (for job training). In 2001, with the support of Mayor Tom Menino, who called linkage "one of the best tools we have for creating affordable housing in the City," the fee was raised from $5.49 for housing and $1.09 for jobs to $7.18 and $1.44, respectively, and the payment schedule was shortened from 12 to 7 years. Boston's linkage program has collected $45 million.

Chicago, Illinois

Whereas linkage programs typically charge a fee to developers, Chicago's Regional Jobs/Housing Fund Concept, which is under development as of 2010, is unique in that it would require municipalities that permit and benefit from new commercial and industrial development to pay the linkage fee. As a result of its regional scope, the Fund addresses the jobs/housing mismatch in economically segregated regions by identifying "unbalanced" municipalities within the region, based on their ratio of jobs to affordable housing units, and diverting a portion of their increasing tax base to the Regional Jobs/Housing Fund. Municipalities with a ratio of jobs to affordable housing greater than the regional average would be subject to the fee. An exemption to the fee is made for municipalities in which 20% or more of their housing stock is defined as affordable, even if their jobs/affordable housing ratio is greater than the regional average. A state legislated Regional Jobs/Housing Commission would oversee the Fund.