Impact fees vs. housing costs
Growth should pay for itself.
Many residents in St. George and Southern Utah would agree with that statement.
We need more housing that working people can afford.
Again, many residents would agree.
But trying to accomplish both goals at the same time is proving to be difficult. The St. George City Council’s vote during last Thursday’s meeting shows how the city is caught in somewhat of a Catch-22.
The council voted to increase impact fees — the charges imposed on developers to help pay for infrastructure associated with new construction — by 16 percent for residential units and by more than 100 percent on some commercial units.
For perspective, that equates to approximately an $1,100 hike for a new home on a 6,000-square-foot or larger lot and an approximately $17,000 boost on an 8,500-square-foot commercial property.
This is a significant increase that will be phased in between now and Jan. 1 — a relatively short time in the building world.
People who think growth should pay for itself rightfully like this decision. Current taxpayers shouldn’t have to pay the way for future residents.
But the increase in impact fees won’t be absorbed totally by developers. Those costs will be passed down to the people buying the property, which means home prices likely will continue to soar.
In 2003, the average home price in Washington County was $178,492. By the end of the first quarter of 2006, the average home price was $327,322 — an 83.4 percent spike.
Considering the median wage in Washington County is hovering near the $12-an-hour mark, and it’s easy to see that people are being priced out of the market.
Who will work in these new businesses? It might sound absurd to some, but if people don’t have a place to live, then the area’s worker shortage could get even worse.
What’s the solution? If I knew that, I’d become a consultant and bag lots of money. One thing I do know is that the solution will take multiple approaches.
But the city council can play a significant role in solving the problem and preventing others in the future.
Regarding impact fees, prior to Thursday’s vote, the city council hadn’t increased some of the fees in 12 years. That makes biting off such a large increase difficult for developers, and eventually for homebuyers. It’s great to be the nice guy and woman who didn’t raise fees for another year, but incremental hikes are much easier to swallow than large increases.
On the homebuyer front, the city will have to find ways to allow for the waiving or reimbursement of impact fees for developers who sell homes for less than $200,000 or even lower.
Of course, that would mean that taxpayers might find themselves paying for growth after all.
See how difficult this issue really is?

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Comments
The author's contention that these new impact fees will increase housing costs may be true. It's also true that lower impact fees don't hold the builders back from charging high prices anyway. The fees weren't raised for 12 years, but that didn't keep housing prices from escalating. We're going to pay for this growth one way or another. That's why many of us are saying let's slow down this process and do it the right way.
Posted by: Lisa Rutherford | July 24, 2006 09:54 AM
It's pretty simple, really. Washington and Iron county wages are very very low. I have my own business and would never dream of working for the absurd wages most Washington county employers offer. Wages will need to go up, and the cost of everything will go up as a result. It's part of becoming urban. It's the price all of us are going to have to pay as a result of a poorly planned and ill advised growth frenzy. In Southern California where there is no shortage of workers, prices are so high the amounts being discussed in Washington county are laughable chump change. So instead of moaning about impact fees and trying to get houses under $200,000 (which will never again be seen in Washington county no matter what is done) it's time to bite the bullet and make the pay equivalent to that in Las Vegas and surrounding urban areas. Becoming a big city is what the city fathers want, is it not? Then it's time to face the fact that with the fat checks for developers come lots of expenses and a higher cost of living for everyone. The days of low cost living in Washington County are coming to an end. It's very basic, and no amount of crying otherwise will change the facts. The reason home prices are going up is even now, these prices are dirt cheap bargains for people from other areas where real wages are paid and the cost of living is higher. They have hundreds of thousands to go per house before they are not a cheap cheap bargain to millions of Californians. Thus, there is nothing Utahns can do to financially compete except go to places where real wages are paid and then buy back in later. Or employers will have to pay wages commensurate with the cost of living.
Posted by: Damien | July 24, 2006 07:06 PM
An $1,100 increase in impact fees will not cause the price of an average home in St. George to "soar" -- it is less than three-tenths of 1% on a $327,000 home. That is less than the difference between formica and grantite countertops.
If we the people in St.George are concerned about the high price of housing, impact fees is not the culprit, although developers will try to make it the scapegoat.
Posted by: Observer | July 24, 2006 09:16 PM
Increased impact fees are a great idea. Frankly, I think the increases voted on so far are way too low! In order to fund the Lake Powell pipeline, for instance, fees should be increased by approximately $50,000 per 1/5th acre for residential construction, $100,000 per 1/5th acre for commercial construction. Once a total of $3.5 billion dollars is accumulated - the actual cost of construction of the pipeline, not the tiny pittance the proponents claim - then construction can commence! At that point, fees should be doubled on all future construction, in order to pay for the rest of the infrastructure that will be needed - schools, fire stations, police stations, graffiti abatement, new sewer and water systems, construction of the $10.5 billion dollar interchange to replace the roundabout, and all the rest!
Posted by: Barry Short | July 25, 2006 11:34 AM
Hey! On Monday I was just paying you guys a compliment over at www.steveu.com and, then, you up and start a blog. Welcome to the blogosphere!
Posted by: Steve Urquhart | July 26, 2006 08:31 AM
The only way that the prices of housing can be met is by either raising the pay scale of the workers or limit the growth in St. George and Washington County. Since tht is not likely to happen then the Powers that be will have to accept the fact that pricing of construction will start to get out of hand and those people that are at the lower end of the pay scale will have to move somewhere else and that would be a shame.
Posted by: Jack Davidson | August 14, 2006 05:18 PM
I have recently had the privilege of participating with the So. Utah Home Builders Assoc. and the St. George Chamber of Commerce. I listened to the economist's (alias: politician) report the results of the economic study and claiming that development pays for itself. A kind lady named Mary spoke at a recent Chamber luncheon about heavy criticism of the economic study. I commend Mary on her desire to be diplomatic, but she was too nice when mentioning the implication that this study was self-serving to the building industry. It is obvious that the study and conclusion was very self-serving.
I found the outcome of the economic study very aggravating for one important reason: The study was originally initiated because the inflated price of homes (fueled by greed, not a quest for reasonable profits) placed home ownership out of reach of many 'core' community members, such as teachers and law enforcement officers. The emphasis of the study was somehow (Should I be confused as to how and why?) shifted to the on-going revenues development generates for GOVERNMENT. Revenues realized by government has little to do with the inability of lower income (Utah wager earners) to afford a home. I believe the study and the ‘purported’ purpose for it needs to be reviewed AND the purpose and emphasis be on the impact development has on INDIVIDUALS and FAMILIES
Posted by: Gary | August 24, 2006 11:46 AM