Impact fees, regulations, delays in construction, regulatory barriers and taxes all contribute to affordable housing problems. Dr. Bob McClure, president and CEO of The James Madison Institute, offered an overview of an important study about how government actions affect workforce housing at a joint meeting this week between Gulf Coast Builders Exchange and The Argus Foundation.

This study examined market forces and how when government intervenes, it can purposefully, or not purposefully, make housing more expensive. Dr. McClure started at the 50,000-foot level and got all of the way down to the non-function of Sarasota County’s impact fee calculator and how this is affecting housing prices.

After we acknowledge that we are not building enough to meet demand, we move to regulatory issues. Dr. McClure boiled it down well, a complex approval process that is drawn out, unpredictable, and full of extra costs is essentially another tax passed onto homebuyers. 

He called it the “Time is money” tax. As money is tied up, it loses value and bears interest carrying costs. That just doesn’t go away in development, it is calculated into development and passed on to the homebuyer.

Impact fees and regulatory costs can have a disproportionate impact upon the buyer. Dr. McClure gave the example of impact fee costs between two homes. A home of $175,000 may bear a cost of $16,000 in impact fees, while a home of $400,000 may only bear a fee of $20,000. Which buyer will find it easier to absorb the fee? Of course, the buyer of the more expensive home is less sensitive to such increases.

Unquestionably, Dr. McClure stated managing growth is Florida’s most important issue. We are gaining residents from high tax and regulation states like New York every day, like me, and my parents, and my sister, and members of my extended family. All of us migrated from New York over the past two decades to escape the economic burdens created by New York state and local governments. “Live free or move” as Dr. McClure so aptly put it.

But just piling on fees and regulations without considering the effect of them on housing costs is turning a blind eye to a big problem.

Dr. McClure summarized the recommendations from the study for the crowd; We must make the system more predictable, easier to use, less burdensome and more certain. Fees should be linked to home size to reduce their regressive nature. Fees should only be calculated and used for the actual cost of the infrastructure or service and the fee should be easy to understand and determine on your own. The fee calculations should be locked in at the beginning of processes, not in the middle or end, and always look at how regulation will add to housing prices.

To view this study and find out more, click here. 

This aspect of housing should not be ignored and should be evaluated every time a new process or regulation is put in place if governments are serious about housing costs.

Christine Robinson is executive director of The Argus Foundation.