A study from the Tallahassee-based James Madison Institute reviewed local impact fees and land-use regulations on workforce housing in Florida.
What is preventing the housing supply in Florida from meeting increasingly feverish demand? A conservative think tank argues that government regulatory barriers are a big part of the problem.
A study from the Tallahassee-based James Madison Institute reviewed local impact fees and land-use regulations on workforce housing in Florida. The study concluded that impact fees can hike the cost of homes for lower-income families and push them out of the market while also placing additional burdens on builders and developers.
“Public policy increases housing costs oftentimes, either intentionally or unintentionally; I’m not here to judge,” said Robert McClure, president and CEO of the James Madison Institute. “More stringent building codes will require builders to use different or more materials than they otherwise would use. In other cases, policy makers have a direct impact on housing costs and ultimately prices by levying higher taxes impacting new developments or causing delays in construction by delays. The old adage, ‘Time is money,’ it’s true. That’s important to understand.”
McClure was in Sarasota on Thursday to address a group of about 115 business people and local politicians at a Meet the Minds Luncheon, arranged by The Argus Foundation and the Gulf Coast Builders Exchange. The luncheons are designed to focus on specific issues by bringing in special guests. The topic this time was how local impact fees and land-use regulations impact affordable housing in Florida.
Citing data from the U.S. Census Bureau, the report said that Florida’s population increased by 284,566 people per year on average between 2010 and 2016. Home prices in the state’s major metropolitan areas have increased by almost 10% a year, according to the report, and housing prices are 4% to 7% above the median income in many parts of Florida, higher than what the report calls the “commonly accepted threshold” of 3% to 4% the median income. Wages, meanwhile, are only inching forward.
Impact fees, which are designed to generate revenue from new developments to offset their added strain on existing infrastructure, can sometimes have unintended negative consequences, McClure said. They impose a direct cost on developers far in advance of the homes being sold. They can be difficult to predict and are prone to quick changes, meaning developers often will start building as soon as they can out of fear that the fees will go up.
“For households on the economic margins of home ownership, a relatively small fee of $5,000 per unit or $8,000 per unit, $10,000 per unit, could push home ownership beyond their means if the fee is fully capitalized in the sales price,” McClure said. “The impact will also place a disproportionate burden on lower-cost homes and lower-impact homes, because in many areas of the state, it is not based on size of the house, or those kinds of things — it’s a fee, or percent set by local government.”
Sarasota County’s impact fees differ quite a bit, depending on the size, cost and location of the home. They include charges for fire and police, education, parks and roads and other systems. Proponents of impact fees argue that in their absence, or when charges are too low to offset new development’s impact, existing taxpayers are forced to bear the cost of widening roads, building new jails and government buildings and other services needed to pay for growth. Regulations for stronger building codes — for example, to help homes withstand hurricanes — also protect public safety and save money in other areas, such as for property insurance.
Affordable housing advocates also contend that one of the problems in Florida is that state lawmakers have swept tens of millions of dollars from funds that are supposed to be dedicated to promoting affordable homes and used the money for other purposes.
Land-use regulations, McClure argued in his speech, are part of the reason housing costs have increased while construction costs have remained largely flat. The study also found that the regulations decrease the price of vacant residential land.
“The combination of higher home prices and lower land prices due to an additional regulation is consistent with the theory that land-use regulations increase costs for developers and that some of this increase is passed on to home buyers,” McClure said.
Ultimately, McClure called for reconsidering regulatory and tax burdens for builders and developers.
“Academic research suggests impact fees, land-use regulations and permitting delays increase the price of houses, and these increases are proportionately larger on smaller houses, which makes home ownership more difficult for lower income working families,” he said.