Tucson Builders Seek Relief From Sweltering Impact Fees
With impact fees and other government-imposed fees pushing the cost of housing in the Tucson-Pima County area beyond the means of many families, the Southern Arizona Home Builders Association (SAHBA) is looking to work with local governments to find alternative ways to finance much-needed infrastructure.
The association has approached NAHB to bring its “Infrastructure Solutions Program” to the region in 2008. This alternative financing program helps governments partner with builders to create innovative growth strategies that identify other funding sources.
The unwillingness of regional governments to raise taxes has resulted in aging infrastructure, traffic congestion, overcrowded schools, inadequate water and sewer capacity, and other urban problems. The NAHB program introduces best practices from progressive governments demonstrating how municipalities can leverage their limited resources more effectively.
“The quality of roads, schools and other public infrastructure has a big impact on a community’s quality of life,” said Debra Bassert, NAHB’s assistant staff vice president for land development. “When local governments don’t plan for and invest in infrastructure, the citizens end up having to endure the resulting headaches.”
NAHB has developed a series of three publications that explain a variety of successful infrastructure financing and management options that have been used by state and local governments around the country.
“We’ve spent the last five years identifying alternative infrastructure finance mechanisms that enable communities to develop the public facilities they need to meet the needs of their citizens,” Bassert said. “The needs and expectations are different from one city to the next, and the laws are different in every state. We will be working with SAHBA to identify the financing options available in Arizona that are most likely to be effective in the greater Tucson area.”
In Pima County, government-imposed residential building fees, taxes and surcharges now average $26,521 for a typical $258,407 median-priced, 1,941 square-foot, newly built home, based on a SAHBA study recently updated with January 2007 data.
The average governmental surcharge per new home was $16,166 in 2005 and $25,758 in 2006.
Impact Fees an Unreliable Source of Income
“We’re now in an adjustment period where the construction of new homes has slowed dramatically. As building-related revenues have fallen, government officials finally realize that impact fees are an unreliable, undependable source of income,” said SAHBA President Ed Taczanowsky. “Over the past 10 years, municipalities have become addicted to impact fees on new homes. That is a funding source that governments need to re-evaluate.”
Rising regulatory fees and building restrictions are pushing more home builders out of metro Tucson-Pima County into outlying areas, accelerating sprawl at the same time as they squeeze housing affordability in the urban core.
In Oro Valley, for example, recent actions by the town council have dampened the interest of most builders in doing further business there. In September, Alternative Water Resource fees are set to increase from $300 to $1,300 for the typical residential water meter. In five years, the fee rockets to $5,182 per new home.
Also in September, the Potable Water impact fee jumps $700 from $1,867 to $2,567 per new home.
“Because of the onset of these new water fees, their existing high impact fees and the overall difficulty of doing business in Oro Valley, I won’t even look for land there for future developments,” said John Shorbe, president of Canoa Homes.
“For the benefit of my home-buying customers, it is more economical for them to buy a home in the outlying areas instead of in Oro Valley,” he said.
New home construction in Oro Valley has dropped 28% in the last few years — from 482 units in 2004 to 349 units in 2006.
Tucson Turning Its Back on Infill
Likewise within the City of Tucson, the prevalence of neighborhood-driven ordinances and other land use restrictions, coupled with high impact fees, also is pushing builders outside the urban core.
“I used to do a lot of infill work within the city limits, buying smaller parcels and doing projects as small as 25 lots in a subdivision,” said Shorbe. “But now, many of the city’s new land use ordinances and building restrictions are being pushed by neighborhood groups that don’t want to see any vacant lots developed.”
“Infill produces millions of dollars in new revenue from existing infrastructure for the city, and that is something city leaders are turning their backs on,” he said. “There are still some parcels available that would be great infill sites, but builders like myself won’t do infill with the city because their policies and ordinances have become too restrictive.”
Based on the SAHBA study’s updated statistics, when buyers roll the government fees into a 6.5%, 30-year fixed-rate mortgage, the total cost of the exactions exceeds the Census Bureau’s 2005 annual median household income for Pima County-area residents of $41,521.
“This creates an unacceptable, significant obstacle to providing affordable housing,” said Taczanowsky. “In unincorporated Pima County, for example, new home buyers could spend an entire year’s wages on government fees and taxes and still be $6,000 short.”
To pay the government fees in their mortgages, residents pay an additional:
- $132.07 per month in Pima County
- $143.79 per month Sahuarita
- $157.53 per month in Tucson
- $196.49 per month in Oro Valley
- $208.28 per month in Marana
There are currently three publications in NAHB's series of infrastructure reports. To download a free copy, click on these titles:
For more information, e-mail Blake Smith at NAHB, or call him at 800-368-5242 x8583.