Impact fees and their “negative” impact on starter homes

Question: When will Government learn?

Answer: After everyone else has seen the terrible effects of its actions…and then it will be a little bit longer.

State and local governing authorities institute laws or ordinances allowing the local municipality to charge an impact fee. This fee helps to finance part of the infrastructure such as streets, schools, transportation, fire, police, environmental litigation, utilities, and other governing expenses. Of course much of the support of infrastructure is financed by property taxes, but sometimes it is not enough and the newer roads and development related costs of new houses/buildings creates a large expense that must be paid back over several years. To hedge the excessive debt, a fee is charged to each lot developed. This average U.S. impact fee is about $21,000 (About $2,500 in Houston up to $72,000 in San Francisco.

Since starter homes are lower priced for lower income residents, the impact fee is harder to pass onto homeowners (alot less difficult with higher margin homes) and therefore is mostly absorbed by builders and becomes more of a burden on builder profit margins. And builders don’t like to take risks just to make next to nothing at all on homes.

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