Regulatory fees increase the cost of new housing

The National Association of Home Builders (NAHB) recently sent a message to local builders to appeal to local, state and national leaders to reduce regulatory charges in order to bring home prices down. Locally, builders pay impact fees to jurisdictions where they build new homes. 

These “impact fees” are often cited as the cause for escalating home prices. The combined fees represent nearly 24% of the cost of building a new home, according to the NAHB/Wells Fargo Housing Market Index. While it seems like a substantial piece, and it is, it isn’t the largest or the ones that are the most unpredictable. 

There are a number of significant reasons these fees can’t or shouldn't be waived. One is that a local jurisdiction can’t change state and federal fees. Another is that it would be difficult to waive for one builder or project and not the others in order to remain an equitable use. It would also be a government subsidy as the items the impact fees pay for would have to come from somewhere else, which just shifts those fees to existing home and business owners. And potentially, even if the fees were reduced, there isn’t a guarantee the builder would reduce the price to the consumer. 

The source of the fees is what has to be considered so that change can come from all levels to ensure tangible cost savings in the industry. Regulatory costs for builders include building codes, land use, environmental and other rules. Therefore, an evaluation of these fees should be addressed at all levels of government.

In Idaho, development impact fees are determined by state statutes. They are based on “a reasonable and fair formula or method” to share costs. Governments consider many things when trying to calculate impact fees for a new development: 

• Any appropriate credit, offset or contribution of money, dedication of land, or construction of system improvements 

• Payments reasonably anticipated to be made by or as a result of a new development in the form of user fees and debt service payments

• That portion of general tax and other revenues allocated by the jurisdiction to system improvements

• The extent to which the new development should be credited for providing system improvements, without charge to other properties within the service area or areas

• All other available sources for funding such system improvements

Although most jurisdictions have adjusted impact fees in recent years, the general consensus from area builders, based on input through the North Idaho Building Contractors Association (NIBCA), are that the fees are reasonable, expected and necessary for good projects and infrastructure. 

The building industry and regulatory agencies recognize the effect of the increase in these fees over the years. NIBCA spends hours with state agencies annually reviewing all aspects of impact fees. Their position is that they support them, as long as they’re fair and equitable. 

Ongoing discussions with builders may enhance development incentives while continuing to make growth pay for itself with reasonable impact fees and regulatory costs. It is a balance that creates stability for all.

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Kiki Miller is a Coeur d’Alene City Council member and founding member of the Housing Solutions Partnership.