Fee has an impact on housing market

Development: Builders feel the pinch as some jurisdictions consider imposing one-time impact fees on new homes and others consider raising theirs.

March 14, 2004|By Tracy Swartz | Tracy Swartz,SUN STAFF

Donna Dale doesn't remember hearing the term "impact fee" last month when she bought her new three-bedroom home in Severn.

"There are so many fees involved, and so many numbers are thrown past you, that if it was mentioned it didn't register," Dale said.

Labeled a hidden tax by builders, an impact fee is a one-time, flat levy on new homes that helps finance expanded government services such as schools, roads, transportation and public safety.

Although marked for developers, the tax usually is shifted to consumers through the price of the home. And Maryland buyers of new homes are feeling the pinch as some area counties increase their impact fees and other jurisdictions consider such fees as a way to raise revenue.

Because of growth and revenue concerns, more new homes are being taxed nationwide as officials decide to pay for capital costs with impact fees paid by the buyers of new homes rather than by increasing taxes on existing homes.

Builders say the fees burden buyers who have no say on the levy and that higher house prices put homeownership out of reach for low- and middle-income families. They also worry that the fees will further limit development and push residential construction jobs to other states.

Area homebuilder Thomas Brown, president of American Builder Services in Severna Park, said, "Impact fees are a major problem ... primarily for first-time homebuyers. They have a tough time getting started anyhow."

The idea behind impact fees is that growth pays its own way, said Clancy Mullen of Duncan Associates, a Texas-based consulting firm that specializes in planning. What services rely on the fees varies by county, and the buyer's tab depends on the type of home.

First popular in Florida and California, impact fees were adopted in 1987 by Anne Arundel County to pay for roads and schools. Carroll County now assesses the fee, and the Harford County delegation recently approved a plan to levy fees of up to $10,000 per house to help pay for schools.

Builders belonging to the Home Builders Association of Maryland wouldn't comment on the pending Harford legislation. But the group thinks it is unfair for buyers of new homes to pay more than their share of the costs associated with growth when existing homeowners also contribute to the growth when their families expand, said John E. Kortecamp, the association's executive vice president.

The association supports a more proportional fee or a transfer tax, a levy paid when property is bought or sold. Kortecamp said it has become "virtually impossible" for young couples and first-time homebuyers to get started in Central Maryland's housing market as new fees increase the price of residential construction.

The average sales price last year in the Baltimore region was $243,763 for an attached home and $379,306 for a detached home, according to the Meyers Group, a real estate information and consulting firm that tracks sales.

Buyer doesn't see it

Developers pay impact fees when they obtain their building permits, said Michael DeStefano, president of Gambrills-based Sturbridge Homes and past president of the state builders group. Builders typically tack the fees onto the cost of the house, and the buyer doesn't see it in a price breakdown.

"We pay very, very hefty impact fees," said DeStefano, whose company built Dale's home. "In Anne Arundel County in particular, there's no real affordable housing being built anymore. The market has gone too high."

Those buying new homes in Anne Arundel pay $4,361 in impact fees for a single-family detached home and $3,010 for a single-family attached home.

Impact fees totaled about 1 percent of the cost of Dale's new home. She paid $425,295 for her house. The impact fee included $3,388 for schools, $862 for transportation and $111 for public safety.

Anne Arundel officials say the fees raise about $7.7 million annually. Since 1987, the county has collected more than $109 million in impact fees.

"The idea is to try to get an equitable balance between the impact of new development and who pays for it," said James Cannelli, Anne Arundel assistant planning and zoning officer. "It's certainly not the only source of revenue needed to build infrastructure. But it helps."

Statewide use

About half of Maryland's counties raise revenue through impact fees or development excise taxes, which are based on a home's square footage. Impact fees pay for expenses related to new infrastructure, and revenue from excise taxes can be used to renovate or maintain existing facilities.

A study released in September MaryPIRG, a nonprofit Maryland group, found that Maryland counties should use these taxes to reinforce growth-management policies, steer growth to target areas and protect open space. The Baltimore public interest research group reported that last year, the fees on single-family homes ranged from $2,800 in Howard County to $16,164 in Frederick County.

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