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Now Is the Time for Builders to Seek Impact Fee Relief
Some local governments are providing relief from impact fees in an effort to encourage economic growth during the current slowdown, according to NAHB's State and Local Reporter, and now is the time for local home builders associations to consider approaching their local jurisdictions to ask for impact fee reductions and rollbacks.
Grappling with a slump in new development that is drying up this source of funding for infrastructure and services, many communities in the U.S. are concluding that they need to postpone impact fee increases, reduce the fees or even temporarily halt their collection.
In addition to reducing the burden of impact fees, state and local governments can spur their economies by providing mortgage and foreclosure assistance, tax credit programs, alternative infrastructure funding mechanisms and a streamlined regulatory process.
These stimulus proposals are posted on an NAHB Web site that was launched in March.
Impact fee income for local governments varies annually depending upon the amount of new residential construction. When building permits drop sharply, as they have in many parts of the country, so do revenues derived from construction activity. Compounding the problem, tax revenue has also declined, forcing many localities to reconsider or slow down their infrastructure expansion plans.
Impact fees can only be used for the purposes for which they are collected and most state statutes and local ordinances set a time frame within which they must be spent before they are refunded, often with interest. Many local jurisdictions are now questioning whether they should continue collecting impact fees at a time when they might have to delay capital projects and possibly refund the fees.
Alternatively, some communities are debating the merits of impact fee reductions as a way to stimulate the home building industry and the local economy by making new development more financially viable.
Hernando County, Fla., for one, has been hit hard by the housing slump, with much of its economic base tied to construction. Builders in that community have approached the county to consider a temporary 25% reduction in their fees to stimulate new home construction and make housing more affordable. In the process, the county would qualify for a new state first-time home buying program offering downpayment assistance to communities that reduce impact fees.
Other communities such as Redding, Calif. have postponed impact fee increases until 2009.
Information about impact fees and alternative methods of finance for local governments is available at www.nahb.org/infrastructurefinance.
For more information, e-mail Thais Austin at NAHB, or call her at 800-368-5242 x8343.
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