Rhett M. Turner and Dr. Howard Bashford, Technology Education & Construction Management
The purpose of impact fees is to help fund infrastructure needs brought on by new growth. The State of Utah has recently passed legislation which allows cities to charge impact fees for the construction of new homes. These impact fees can be substantial, amounting to thousands of dollars for each home.
I wanted to find out what kind of effect these impact fees have on the affordability of housing in the Utah Valley area and how much each city charged in impact fees. Are impact fees adverse to national and local goals of home ownership and affordable housing?
I visited sixteen cities in the Utah Valley area from Alpine southward to Santaquin and discovered that what each city charged for the impact of new construction (impact fees) was different. (TABLE 1) Most cities had fees for sewer, water, and parks but some also had fees for electrical, streets, storm drains/water, irrigation, and safety(fire & police). Six cities are a part of the Timpanogos Special Service District which charges a $1,000 impact fee in addition to the cities’ impact fees for new construction. One city charged $1,000 infrastructure protection bond in addition to its impact fees. I found it hard to gather this information because some cities didn’t have the information published in a format that I could understand, and others were not sure who I needed to get the information from. When I did get the information, after further study and more calls, I would find that some cities had neglected to tell me of other fees, or the impact fees were instead called connection fees. In one city I had to get the impact fee information myself by looking through city records. I am still not sure that I have obtained all of the correct impact fees for each specific city, but if my records are correct, then of the sixteen cities listed the average impact fee is around $4,656.35 for each new single family residence.(TABLE 1) This means that you will have to build a home that is almost $5,000 less than you originally planned.
The U.S. Census Bureau records show the average income for a four person family in Utah is around 45,000 a year.1 Approximately 30% of your income can be allotted to your house payment. This would come out to a monthly house payment of $1,125.00. This monthly payment would allow for a $153,000 loan at an interest rate of 8% over 30 years.2 In reality, because of impact fees associated with new construction you could only afford a home worth approximately $148,000 unless you were able make up the difference with cash out of your pocket. In conclusion, based on the information from this research I believe that impact fees are adverse to national and local goals of home ownership and affordable housing, because many people would have a hard time coming up with an extra $5,000 up front to cover the impact fees in addition to their down payment. I also believe that impact fees are still important in order for cities to manage new growth.
References
- U.S. Census Bureau, “http://www.census.gov/hhes/income/4person.html”
- Inland Mortgage Corporation, “http://www.inlandmortgage.com/nlamrtze.html”