Gov’t Fees Part of Affordable Housing Problem

Guest Correspondence

The Argus Foundation has written extensively about government regulation and its effect on affordable housing. Today, we are going to focus on government fees.

According to the community movement Strong Towns, the first of the five immutable laws of affordable housing is that “developers don’t pay the costs of construction: tenants and buyers do.”  

What this means is that fees don’t just magically disappear, and it’s not developers who absorb them. They are always paid by a buyer or renter, and that includes those who need affordable housing. Unless a government subsidy is involved or the housing is incentivized or partially paid for by government, fees fall on the consumer. 

This year, multiple government fees are being studied, reviewed, and updated. Mobility fees, fire fees, utility fees, and stormwater fees are among them in the county alone. City governments are doing the same, many looking at their fees. All of these fees add to the cost of housing and all will affect its affordability.

According to the Brookings Institute, soft costs, which include permitting and government fees, among other things, make up 30% of the cost of housing. This number is not insignificant. A house that is $250,000, contains about $75,000 worth of soft costs.      

It is important that each government take a moment and determine how a fee structure or cost will affect housing for our workforce and across the housing spectrum. Ignoring housing costs in the fee conversation is a recipe for disaster.

Just acknowledging affordable housing or trying to carve affordable housing out is not enough. You are then fighting the overall housing market and making things worse. 

You must try to control fees and costs for all housing types to create a complete step-up system of housing for the community. Doing this frees up affordable housing as owners gain more equity in their housing over time and use that equity to move into larger homes. 

If you shift the costs of affordable housing to other housing types, you then create large gaps in housing. The housing outside of what is deemed affordable jumps higher in cost, leaving those who want to graduate up from affordable housing unable to do so, and thus artificially keeping them in affordable housing. This then makes affordable housing hard to find as no one can move out of it to free it up.

Housing soft costs and how they affect the general housing market should be an important part of the discussion for government fees. It is not the only part of the fee discussion, but it should be a significant part of it. Governments can and do contribute to the problem by not looking at the overall market. The Argus Foundation encourages governments to have deeper discussions about the overall housing market when looking at setting government fees.

Christine Robinson is executive director for The Argus Foundation.

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