System Development Charges are one of those behind-the-scenes costs that most home buyers never think about but that directly affect what they pay for a new home. Bend is in the process of overhauling its SDC system, and the changes could meaningfully shift the economics of new construction, particularly for smaller and more affordable housing. Here is where the process stands and what it means for anyone building, buying, or selling in Bend.
What SDCs Are and Why They Matter
When a new home or commercial building goes up, it puts additional demand on the city’s infrastructure: roads, water supply, sewer capacity, parks, and stormwater systems. System Development Charges are one-time fees levied on new development to fund the infrastructure needed to serve that growth. In Bend, SDCs cover transportation, water, sewer, parks, and stormwater.
These fees are not trivial. For a typical single-family home in Bend, SDCs can add $30,000 to $50,000 to the cost of construction, depending on the size and location. That cost gets passed directly to the buyer. When you hear builders and housing advocates talk about reducing barriers to affordable housing, SDC reform is near the top of the list.
The Problem With a Flat Fee System
Historically, Bend has used a relatively flat SDC structure: every new single-family home pays roughly the same amount regardless of whether it’s a 1,200-square-foot starter home or a 4,500-square-foot custom build. The logic was simplicity. The problem is fairness.
A smaller home places less demand on infrastructure. Fewer occupants typically mean fewer vehicle trips, less water consumption, and less sewer load. Charging the same fee for a small home as a large one means the small home bears a disproportionate cost burden relative to its actual infrastructure impact. That disproportionate burden makes it harder to build the smaller, more affordable homes that Bend badly needs.
The Stakeholder Process
In early 2023, Bend convened a stakeholder group to study SDC reform. The group met six times between February and August 2023, bringing together builders, housing advocates, city staff, engineers, and community members. A summary of their work was presented to City Council at a work session on September 6, 2023.
The stakeholder group focused on several key questions:
- Should SDCs be tiered based on the size, type, or impact of the development?
- How can the fee structure advance housing affordability without shortchanging infrastructure funding?
- What level of transparency should the methodology provide?
- How do Bend’s SDCs compare to other Oregon cities?
The Direction: Tiered by Impact
The emerging direction, and the one that has gained the most traction in council discussions, is moving to a tiered SDC system. Under this approach, fees would vary based on factors like dwelling unit size, number of bedrooms, or a calculated impact metric. A 1,000-square-foot townhouse would pay less than a 3,500-square-foot single-family home because it generates less demand on city systems.
This isn’t a radical concept. Many cities across Oregon and the country already use tiered SDC models. What makes it significant for Bend is the scale of the housing market and the degree to which high development costs have constrained the types of housing being built.
What This Means for New Home Prices
If the tiered SDC model is adopted, expect two primary effects:
Lower costs for smaller homes. Builders focused on workforce housing, starter homes, townhouses, and middle housing will see reduced SDC bills, which should translate to somewhat lower sale prices. The savings won’t make a $500,000 home suddenly cost $350,000, but reductions of $5,000 to $15,000 per unit are plausible and meaningful for first-time buyers.
Potentially higher costs for larger homes. To maintain overall revenue for infrastructure funding, larger homes may see their SDCs increase. If you’re planning a large custom home, this is worth factoring into your budget. That said, for buyers in the upper market, an additional $5,000 to $10,000 on a million-dollar build is unlikely to change decisions.
The Transparency Factor
One of the stakeholder group’s key recommendations is making the SDC methodology more transparent. Currently, many builders and buyers don’t fully understand what they’re paying or why. A clearer methodology, where you can see how a fee was calculated based on your project’s specific characteristics, builds trust and allows developers to make more informed decisions early in the design process.
What Buyers Should Know
If you’re looking at new construction in Bend, SDCs are baked into the price you pay. You don’t write a separate check for them, but they’re part of what the builder factors into pricing. As SDC reform moves forward, keep an eye on how it affects the types of homes being built. If smaller, more affordable homes become more economically viable, you may see more options in the $350,000 to $500,000 range that have been scarce in recent years.
What Sellers Should Know
SDC reform primarily affects new construction economics, not the resale market directly. However, if tiered SDCs lead to more new housing supply, that additional inventory can moderate price appreciation for existing homes, particularly in the segments where new and existing homes compete most directly.
What Comes Next
The stakeholder recommendations are now with City Council, which will decide whether and how to implement a revised SDC methodology. The timeline for final adoption remains uncertain, as any change to SDC rates involves technical analysis, public comment, and council deliberation. We expect more clarity in the first half of 2024.
How Other Oregon Cities Have Handled SDC Reform
Bend isn’t the first Oregon city to wrestle with SDC reform. Portland, Eugene, and Corvallis have all implemented tiered or scaled SDC structures with varying approaches. Portland’s experience is particularly instructive: their tiered system reduced SDCs for units under 800 square feet by roughly 40%, which measurably increased the production of smaller housing types. Eugene’s approach tied SDCs more directly to trip generation data for transportation fees, creating clearer linkage between fee amounts and actual infrastructure impact.
Bend’s stakeholder group studied these examples, and the emerging recommendations reflect lessons learned from other jurisdictions. The key insight is that tiered SDCs work best when the methodology is transparent, the tiers are based on defensible data about actual infrastructure demand, and the system is simple enough for builders to predict costs early in the design process.
For updates on SDC reform and how it affects Central Oregon housing costs, follow our housing market coverage. Understanding the cost structure behind new development is essential for anyone navigating this market, whether you’re building, buying, or investing. Our team can help you evaluate how these policy changes affect your specific plans.