 What Are Impact Fees?
Generally speaking, “impact fees” are financial
contributions (i.e.,
money, land, etc.) imposed by communities on developers or
builders to pay for capital improvements within the community
which are necessary to service/accommodate the new
development.
Impact fees, however, must be reasonable.
To ensure fairness, impact fees can only be assessed
(1) for capital improvements that are a direct consequence of
the new development and (2) in an amount not exceed an the
proportionate share required to serve the new development.
In other words, a developer cannot be required to pay a
disproportionate share of improvements that also benefit other
persons (i.e., a bridge on the other side of town).
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Why Do Communities Impose Impact Fees?
Communities use impact fees, as opposed to other sources of
revenue, to fund capital improvements for three primary
reasons.
First, many communities either have underestimated their
actual growth or failed to engage in long-range, fiscal
planning for capital improvements altogether. Accordingly,
because these communities have not adequately planned for
growth, they need additional sources of revenue (e.g., impact
fees) to fund those capital improvements which are necessary
to accommodate growth.
Second, many other sources of revenue have dried up as
options for local governments. Over the last several years,
fiscal responsibility has been shifted from federal and state
governments to local units. For example, municipalities are
now required to share more of the burden for transportation
costs than in the past.
Finally, some people contend that the burden of paying for
capital improvements should be borne by new development
because new residents will be the ones who will put pressure
on the existing facilities.
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Why Should REALTORS® Care About Impact Fees?
Although they are an effective means to generate income for
the community, impact fees increase the cost of housing. When
a community imposes an impact fee on new development, the
actual costs are passed on to the purchaser through increased
lot prices. As lot prices increase, the number of people who
are able to afford the lots decreases. In addition, if the
impact fees are too high, prospective homebuyers will look to
other communities with lower prices. Accordingly, by reducing
the number of prospective buyers who are either able or
willing to pay for the increased lot prices, impact fees can
have a devastating impact on local real estate markets.
Despite claims by local neighborhood groups, new residents
are not the only ones affected by impact fees. According to a
recent edition of Planning Magazine, fifty to
seventy-five percent of new homes are purchased by existing
residents looking to trade up within the same community.
Accordingly, impact fees often penalize long-time, tax-paying
residents for wanting to stay in the community.
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Impact Fees Articles
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