Sales of new homes decline

Major drop found in 2 years

Leopold says higher impact fees still needed

December 28, 2007|By Phillip McGowan | Phillip McGowan,Sun reporter

Sales of new homes in Anne Arundel County have plummeted in the past two years, according to a recent analysis prepared for local homebuilders.

But County Executive John R. Leopold said he's unfazed by the possibility that raising impact fees on developers could further stymie residential growth.

The number of new single-family homes, townhouses, condominiums and duplexes sold in Anne Arundel is projected at 878 this year, up from 786 a year earlier, according to data compiled by Hanley Wood Market Intelligence. But those totals represent a substantial drop from an annual average of 1,400 from 2001 to 2005.

In a further indication of the languishing housing market, about 4,000 existing homes are listed for sale in the county -- quadruple the number this time last year, Anne Arundel budget director John Hammond said in a budget briefing last week to state lawmakers.

Hammond has projected that real-estate tax revenues will take a hit as a result. The county is estimated to bring in $90 million for fiscal 2008 from recordation and transfer taxes, which are assessed on property sales and refinancing. That's down from $109 million in the previous fiscal year and from $130 million in fiscal 2006.

"We are clearly building into the FY 2008 budget that the housing market would soften," Hammond said this week. "And indeed it has. In reality, the market has softened more than we had anticipated."

In the face of the revenue decline, the Leopold administration is expected to propose next month a large increase in the impact fees that home developers are charged for new construction -- perhaps tripling or quadrupling them.

Leopold said the current fees on single-family homes ($4,904), townhouses ($3,385) and most condominiums ($2,492) "do not capture the full freight of the cost developers should pay" to offset the impact that projects place on roads, schools and other county services.

A report prepared for the county in September shows that the impact of a single-family home on roads and schools is $21,056; for a townhouse, $17,279; and most condominiums, $12,135. The administration's bill is also expected to factor in impacts on police and fire services.

Jurisdictions across the state have boosted impact fees in recent years to address the footprint of development. In July, Montgomery County raised impact fees on single-family homes in most areas from $14,283 to $15,375.

Anne Arundel last raised impact fees in 2001, instituting a 55 percent increase on single-family homes from $2,629 to $4,069. They have been adjusted annually for inflation.

Leopold's call for higher impact fees reflects his desire to shield existing homeowners from new taxes and fees while pursuing new revenue to keep up with the county's growing financial needs.

The county executive said he's largely unconcerned about the effect increased impact fees would have on the local housing market. He said that the attractiveness of Anne Arundel County, highlighted by its robust economy and extensive shoreline, is fertile ground for homebuilders.

"If the impact fees should result in a slowdown of this meteoric growth, that is not an undesired outcome," Leopold said.

But in a county that operates under a revenue-tax cap and is so dependent on development to expand the coffers of the local government, homebuilders and some county lawmakers such as Councilman C. Edward Middlebrooks said that boosting fees could further disrupt the county's housing market -- at a time when thousands consider moving to Anne Arundel because of defense-job growth.

Eric M. DeVito, incoming president of the Home Builders Association of Maryland's Anne Arundel chapter, said that housing projects that have been financed but await county approval might collapse under the added weight of new impact fees.

"It will not make them viable," he said. "They will just die on the vine."

The cancellation of projects would further limit supply and keep prices elevated, he said.

Just before the start of the housing boom, in 2001, the average base price for a single-family home in Anne Arundel was $347,202, according to Hanley Wood, which tracks new-home sales across the United States, including every county in the Baltimore-Washington region.

Even though the market is sluggish nationally, the price for a single-family home in the county has jumped this year to $655,061, the report found, based on sales from January through October.

Higher new-home prices and increased property assessments are offsetting the loss of some real-estate tax revenue.

Healthy property tax rates will help the county increase its revenue by $45 million, Hammond said.

But homebuilders worry that increased fees will further curtail construction of affordably priced housing.

Leopold countered that the "enormous success" of the homebuilding industry in the previous few years "has not produced a significant increase in work-force housing units."

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