Charging impact fees will make Seattle housing prices worse

THREE Seattle City Council members have announced their intention to seek to impose impact fees on new housing at a time when they, the mayor and candidates seeking city office all have declared a “housing crisis” because of rising prices [“Seattle is overdue for developer impact fees,” Opinion, July 26.]

But does it make sense to impose fees that will contribute to higher production costs and increase the price of housing? Of course not. But shouldn’t, “growth pay for growth”? The fact is new development already does pay for itself while providing much needed housing. Impact fees would just add to an array of existing fees already boosting housing costs. Impact fees will make housing prices worse.

Whenever you spot a new housing project nearing completion, you’ll see new sidewalks, ramps, street trees, power lines and sometimes even new traffic signalization.

What you can’t see is lots of drainage infrastructure, too, both to deliver water service to the project but also to drain water from impervious surfaces and into existing pipes and drains. New projects also pay sewer capacity charges that cover costs of operating the Brightwater facility. All the improvements made by new housing are paid for not by the city but by the new development. Not a single stick of housing is built that doesn’t pay for improvements in proportion to demands it puts on the system.

Housing development also pays lots and lots of fees, taxes and charges that contribute to infrastructure (e.g. sidewalks and drainage) all over the city. Take a look at Seattle’s Cumulative Reserve Subfund (CRS), funded by Real Estate Excise Taxes (REET), taxes charged whenever land changes hands in the city. This year the REET will generate more than $80 million that will be spent on projects like maintaining bridges ($2.6 million), roads ($1.1 million) and even funds the city’s Tenant Relocation Assistance Ordinance (TRAO) with $382,000. And the fees builders and developers pay when they get an alley or right of way vacated by the city will generate $16 millionfor infrastructure needs. And this doesn’t count sales tax and property tax that fund city programs.

What will impact fees do to the cost of housing? A recent study by the city of Portland estimated that on average, “government fees” add 13 percent of the total development cost of housing.

That’s a conservative estimate compared to our own assessment that almost 25 percent of the costs of a new unit of housing in Seattle are fees and taxes. Along with fees being proposed citywide as part of the HALA recommendations to charge builders for forcing them to build additional density, impact fees would add more fuel to an inflationary furnace of housing prices in the city.

Finally, there are strict legal limitations to impact fees. Here’s what the Municipal Research Services Center (MRSC) reminds us about impact fees:

Impact fees may not be used to correct existing deficiencies. For instance, a school district may use the impact fees from a development to pay for construction of new classrooms at specific schools to accommodate the increased enrollment anticipated from that specific development.

Impact fees on a project pay only for improvements that benefit the residents of that development, not for general improvements.

When added to climbing housing-production costs and swelling demand, impact fees will only make much needed housing harder and more expensive to produce at a time when housing prices are rising because housing is scarce.

Instead of thinking up more ways to make housing more costly to produce, City Hall, if it truly cared about rising prices, would cut back on rules, fees and process so that new housing production could more easily meet surging demand.