Tuesday, December 12, 2006

What do Impact Fees Do?

As the LJW editor (12/12/2006) indicates, impact fees are, indeed, an issue for all residents of Lawrence.

Who pays for the costs of new infrastructure?

Developers pass impact fees along into higher house prices because buyers of homes in new subdivisions cannot hop across the city limit into a competing town, as is true in a larger metropolitan context. However, homebuyers do have alternatives; they can buy homes in existing neighborhoods. In the absence of impact fees, the costs of development are passed along to all residents of the city, including those far from the new infrastructure.

Contrary to the claim in the editorial, impact fees do not inflate the real estate market. Only in the most extreme cases—where the most severe shortages exist—would the substitute existing homes experience a price increase. For Lawrence, prices in the existing market will be unaffected by the impact fees.

Should we continue to favor sprawl or wise reuse?

As the editorial stated, “Providing and maintaining the city’s infrastructure is a communitywide responsibility” but that does not say who should pay for it. At issue is the share paid by the new homebuyer and the share paid by the residents who live elsewhere in the City.

The developers have built new subdivisions faster than the city’s population needs them. This sprawl adds to the tax burden of all taxpayers as we have been paying for the new infrastructure. This sprawl also accelerates the decline of older neighborhoods as homebuyers are siphoned away from older neighborhoods. We must pay for their redevelopment. It is not unreasonable, at a time of overbuilt housing and declining older neighborhoods, to ask the buyers of the homes in the new, sprawling subdivisions to pay a greater share of the costs of that sprawl. This may cause some homebuyers to opt for an existing home in an older neighborhood, bringing much needed investment to these areas. This will also free scarce City resources to address the pressing needs for the City’s older infrastructure. This is what impact fees do.

No comments: