Bend City Council Approves New SDC Methodology for Water Sewer and Transportation

The System Development Charge overhaul that Bend has been working toward since early 2023 is now official. In May 2024, Bend City Council approved revised SDC methodologies for water, sewer, and transportation. The new tiered system replaces the flat-fee structure and is designed to be more equitable: smaller homes will pay lower SDCs than larger ones, reflecting their proportionally smaller impact on city infrastructure. The change represents the most significant reform to Bend's development fee structure in over a decade.

What Changed

The core change is the move from a one-size-fits-all fee to a tiered structure. Under the previous system, a 1,200-square-foot starter home and a 4,000-square-foot luxury home paid essentially the same SDCs for water, sewer, and transportation. That's over. The new methodology scales fees based on factors that correlate with actual infrastructure demand.

For residential development, the tiering is based on unit size and type. Smaller homes, ADUs, and middle housing units that generate less infrastructure demand will see lower fees. Larger homes will see fees that more closely reflect their actual impact on water consumption, sewer capacity, and road use.

For non-residential development, the changes are more complex. Some commercial categories will see notable increases in their SDC obligations. To cushion this impact, the council approved a three-year phase-in period for non-residential uses with significant fee increases. This gives businesses and commercial developers time to adjust their financial models.

The Numbers

Specific dollar amounts vary by project type and size, but the directional impact is clear:

• Smaller residential units (under approximately 1,500 square feet): SDC reductions of roughly $3,000 to $10,000 compared to the previous flat fee
• ADUs and middle housing: Proportionally lower fees reflecting their smaller infrastructure footprint
• Standard single-family homes (1,500 to 2,500 square feet): Fees roughly comparable to the previous system
• Larger residential: Modest increases reflecting greater infrastructure demand
• Commercial development: Mixed results depending on the use type, with some categories seeing increases phased over three years

Why the Tiered Approach Is Better

A tiered SDC system is better policy for one fundamental reason: it aligns costs with impacts. Infrastructure costs money, and the entities that create more demand should pay more. A household of two in a small cottage uses less water, generates fewer vehicle trips, and produces less sewer load than a household of six in a large home. Charging them the same flat fee was convenient but not equitable.

The old flat system also created a perverse incentive. Because SDCs represented a fixed cost regardless of home size, builders had every reason to build larger, more expensive homes where the fees were a smaller percentage of the total cost. A $40,000 SDC on a $400,000 starter home is 10% of the price. The same $40,000 on a $1.2 million home is 3.3%. The flat fee effectively subsidized expensive housing at the expense of affordable housing.

The tiered system removes that distortion. By lowering fees for smaller units, it improves the economic viability of building the workforce and starter housing that Bend needs most.

Connection to the Broader Housing Strategy

SDC reform doesn't exist in isolation. It's part of a suite of policies aimed at making housing more affordable and more diverse in Bend:

• HB 2001 middle housing allowances create the zoning permission for diverse housing types
• ADU expansion increases the number of units that can be built on existing lots
• Tiered SDCs make smaller, more affordable units more economically viable to build
• SB 1537 UGB expansion adds developable land with affordability requirements

Each policy addresses a different piece of the puzzle. Together, they create a more favorable environment for building the range of housing types that a diverse community needs.

What This Means for Buyers

If you're looking at new construction in Bend, tiered SDCs will gradually influence the types of homes being built. Expect to see more smaller homes, more townhouses, and more cottage-style developments as the economics become more favorable for those product types. This won't happen overnight because builders already have projects in their pipelines, but over the next two to three years, the shift should become visible in the market.

For buyers in the $350,000 to $500,000 range, this is good news. Lower SDCs for smaller homes mean builders can deliver finished product at slightly lower price points, or absorb less of the fee into their margins, or both. The effect is incremental, not transformational, but it moves the needle in the right direction.

What This Means for the Development Community

Builders have generally supported tiered SDCs because the reform aligns fees with the kinds of housing the market needs. The three-year commercial phase-in demonstrates that the council listened to concerns about abrupt fee increases for commercial projects and responded with a reasonable transition period.

The practical impact for builders is that project pro formas now need to account for variable SDCs based on unit types within a development. A project with a mix of small and large units will have a blended SDC cost that's different from a project of uniform large homes. This adds complexity to financial modeling but reflects the real-world impact differences that should have been captured all along.

Going Forward

What the Data Will Show Over Time

The true test of tiered SDCs will be whether they measurably change the mix of housing being built in Bend. The city should track several metrics over the next three to five years:

• The percentage of new permits for units under 1,500 square feet (should increase if lower SDCs improve economics)
• The number of ADU and middle housing permits (should increase with proportionally lower fees)
• Total SDC revenue compared to projections (should remain stable if the methodology accurately reflects demand)
• New construction price points (should show modest downward pressure at the lower end)

If these metrics move in the expected direction, Bend will have evidence that its SDC reform is working. If they don't, the methodology can be adjusted. That's the advantage of a data-driven approach: it creates accountability.

Bend's SDC reform is now in effect and will be reflected in new permit applications going forward. The three-year commercial phase-in means the full impact won't be visible until 2027. We'll track how the new fee structure affects development patterns and housing supply in our housing market reports. If you're planning a construction project or evaluating new construction, our team can help you understand how the updated SDCs factor into your numbers.