INSIDE TUCSON BUSINESS: Mon., Nov. 26, 2007
Home buyers would be better off if government waited for its take
Valley Views by Steve Emerine
It's tempting for homeowners to oppose builders' requests that local governments postpone collecting housing impact fees until the homes are sold. I don't. I'm a homeowner, but I'm also an ex-county assessor and a former consultant to local builders.
The Southern Arizona Home Builders Association (SAHBA) says collecting fees after a sale instead of when the building permit is issued will let builders charge less for new homes and help revive our lagging real estate market.
That's probably true, but there are other reasons for homeowners to support the request.
Many think builders actually pay those impact fees, which vary from $21,000 to $33,000 per home. They feel that's fair because most buyers come from out of state and add burdens to local governments.
Wrong. Buyers pay impact fees. Builders merely collect them.
And 65% to 70% of new-home buyers already live here, says housing expert John Strobeck of Bright Future Business Consultants. Another 5% come from elsewhere in Arizona. They move up from smaller homes or rentals. Some grew up here and are buying their first homes.
So if our children or friends can't find an affordable home, the blame is partly ours. We and our elected officials have made that home more expensive with all kinds of impact fees.
But even if every new home WERE bought by someone from someplace else, impact fees would still harm us Tucsonans.
Imagine you own a three-bedroom, two-bath home worth $200,000 in today's market. When governments add $30,000, or so, in impact fees to the cost of a brand-new home with the same features and square footage as yours, its price will be about $230,000. And when that happens, the market will probably decide your home is also worth about $230,000, depending on its age and condition.
That's not good unless you want to sell it. When impact fees raise the market value of your home, they also raise its full cash value for the county assessor, and your property tax bill will rise, too.
Long before SAHBA's recent request, Bright Future's Strobeck was suggesting the Legislature and local officials should agree on a way to collect impact fees after homes are sold instead of when permits are issued.
In addition to lowering the assessor's full cash value on those homes, the move also would cut the carrying charges builders now pay on impact fees.
Those charges sometimes are more than the fees.
Impact-fee fans argue that they help pay for roads, streets, sidewalks, parks and other improvements required when a new home is built. But they don't. Builders already provide paved streets, sidewalks, utilities, open space for parks and other amenities, and they usually pay to widen major roads bordering their subdivisions. That's already part of the price of the new home.
It's been happening since before I bought my first house in 1961 for $13,790. That home was in the Tucson Mountain foothills, was 1,380 square-feet and came with four bedrooms and two baths.
And I paid no impact fee.
Virtually no money from impact fees is spent for improvements in the subdivision where it's collected. If it were, the owners would be old-timers before bureaucrats could go through the planning and bidding process to spend them.
Instead, impact fees are spent much later, usually several miles from the homes for which they were collected.
And now some elected city officials want to spend them anywhere in the city, no matter where they were collected. If that idea flies, I can't imagine buyers of homes near Rita Ranch feeling warm and fuzzy over their impact fees paying for ceramic crosswalks and murals in the West University area. Can you?