NAHB Guide Finds More Cities Rolling Back Impact Fees

Seeing a significant decline in their impact fee revenues in 2008 and 2009, local jurisdictions nationwide are considering impact fee moratoria, reductions and rollbacks as a strategy for stimulating the local economy during the current downturn and encouraging the production of affordable housing, according to NAHB’s Land Development Services Department.

For example, the city of Fremont, Calif. decided in April to lower its impact fees by 75% in an effort to attract more residential construction and business to the area.

In March, the Eagle Lake, Fla. City Commission voted unanimously to waive impact fees for construction and redevelopment within the city’s Community Redevelopment Area. The change was approved as a stimulus for business development.

As part of its extensive resources on infrastructure finance and public service needs available to association members, the NAHB department continues to track communities that are in the process of providing relief on impact fees.

The latest addition to these impact fee materials — the “Impact Fee Rollback Resource Guide” — includes a regularly updated list of examples of rollbacks that have passed or are being debated by local communities.

Impact fees have proven to be an economically sensitive financing tool for municipalities, with their revenues going up and down with the construction cycle. Local jurisdictions that have counted for years on a robust home building industry to help finance public improvements and services are now finding that those funds are drying up as the national recession deepens and building permit activity remains at historic lows.

Local jurisdictions that are collecting impact fees and relying on them to finance their public improvements and services are at risk of falling short and possibly being put in a position of having to refund the fees with interest if the infrastructure and services are not constructed for these new residents as a result of their revenue shortfall.

Impact fee reductions or waivers can become a permanent incentive for targeted areas or types of development or a temporary stimulus intended to jump-start new home construction.

Other resources on impact fees and infrastructure finance available on nahb.org include:

• "Impact Fee Handbook" — This is the third edition of the popular resource guide on impact fees, providing more than 130 pages of technical, economic, administrative and other information on this financing mechanism.
  
  
• Infrastructure Alternatives Series — NAHB has conducted research and developed a trilogy of publications to help home builders associations and local communities move forward with implementing alternatives. The individual publications are highlighted below and are available online and in hard copy. These publications are increasingly being sought out by such groups as the National Association of Counties, the lieutenant governors and the National League of Cities.
  
  
• "Building for Tomorrow: Innovative Infrastructure Solutions" (2003) is a 32-page report that explains more than 20 innovative financing and delivery mechanisms and presents case studies on how those tools have been applied successfully.
  
  
• "Infrastructure Finance: Does Your State Encourage Innovation?" (2005, updated in 2007) features a matrix of all 50 states, showing which states authorize the use of the 12 most commonly used infrastructure finance tools discussed in “Building for Tomorrow.” It highlights a more in-depth research report written by the National Conference of State Legislatures (NCSL) that summarizes state enabling authority for these tools and includes links to the relevant statutes.
  
  
• "Infrastructure Solutions — Best Practices From Results-Oriented States" (2007), features research from the NCSL on the best state enabling legislation for some of 11 infrastructure finance alternatives. NCSL looked at statutory language from all the states authorizing the use of these finance tools and highlighted the best-written laws that showed the most promise.
  
  
• "Guidebook to Infrastructure Finance Alternative" — This publication summarizes the resources available on the NAHB Web site along with their uses.

In addition to impact fees and infrastructure finance, NAHB’s Land Development Services Department helps members with a wide array of products and services. These include:

• Research — NAHB continues to conduct substantive research on trends in infrastructure finance. Currently, Land Development Services is conducting research on the validity of size-based methodologies for the calculation of impact fees and their impact on housing affordability. The results should be available to association members by the fall.
  
  
• Ordinance Reviews — NAHB staff members in Land Development Services are available to review and analyze local ordinances as well as give technical assistance to help prepare for meetings and hearings with local government.
  
  
• Education — Most recently, NAHB hosted the first of a series of webinars on the topic of “Trends in Impact Fees.” This webinar can be viewed on NAHB’s Web site at www.nahb.org/infrastructurefinance. The remaining five webinars will be on infrastructure and development finance issues of key concern to members and HBAs in light of the financial challenges of the current economic downturn.

For more information on impact fee resources available from NAHB, e-mail Thais Austin, or call her at 800-368-5242 x8343.

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