A new report from the Washington Center for Housing Studies reveals that impact fees imposed by local governments on new residential construction are driving up costs for homebuyers, worsening Washington’s housing affordability crisis.

The report shows that impact fees add an average of $18,433 to the price of single-family homes statewide. Based on that total average, a 50-home development faces $921,595 in impact fees. Neither of these totals factor in holding costs and interest rates, which only add to the final cost to homebuyers.

“Homes are increasingly out of reach for the majority of Washingtonian families, and the burden of added costs like impact fees only deepens the affordability crisis in our state,” said Greg Lane, Executive Vice President of the Building Industry Association of Washington (BIAW).

Discrepancies across jurisdictions

The report shows the tax burden is not equal across the state. Some jurisdictions have much higher impact fees on average compared to others.

For example, a new single-family dwelling in Issaquah would pay a total of $29,590 in impact fees. A 50-dwelling unit residential development in Issaquah would pay a total of $1,479,480. That is 161% greater than the state average.

The report shows that while multi-family dwellings seem to be charged less in impact fees on average than single-family dwellings, some jurisdictions have higher rates for multi-family dwellings than single-family dwellings.

Adding to the final price of homes

Every added cost from regulations, like impact fees, forces builders to factor them into the final sale price of homes in order for the project to break even.

The extra cost of impact fees also affects the types of buildings used in the project or its overall viability. Builders may choose to build fewer high-end homes instead of more middle-market homes, so they pay fewer impact fees overall but sell each home at a higher margin, making it easier to recover the cost of the fees.

What are impact fees?

Impact fees are a type of revenue collected by local government to pay for some of the cost of providing public facilities for new development. They are typically categorized as fire, parks, school, and transportation or traffic impact fees.

Fire, parks, and transportation impact fees are determined and collected by city and county governments. School impact fees are determined by school districts and typically collected by the respective city or county. Builders are charged these fees, regardless of if the buyer is moving from across the country or a mile down the road.

The report shows that school impact fees, on average, are 135% higher than other impact fees. School districts set their own impact fee rates and enter into agreements with cities and counties to collect the fees.

84% of Washington families cannot afford a new home

According to the most recent data from the National Association of Home Builders (NAHB), the median price of a new home in our state is $747,199. At that price, an astounding 84% of Washington families are priced out of purchasing a new home.

BIAW is asking the legislature to pass new laws increasing the transparency of such fees at the city and county levels and limiting impact fee increases. Local governments can control how much they charge for impact fees on new residential construction. By lowering the fees, they can immediately reduce the soft costs of construction and improve affordability.

The report recommends jurisdictions review school enrollment numbers throughout the year. If enrollment has declined compared to the projections in the school district’s capital facilities plan, then they should immediately cease impact fee collections.

To read the full report and others by the Washington Center for Housing Studies, visit www.housingstudies.biaw.com.

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The Washington Center for Housing Studies, in partnership with the Building Industry Association of Washington (BIAW), researches and develops policy information to help decision-makers better understand how and why homebuilding becomes so expensive.

BIAW is the voice of the housing industry. The state’s largest trade association with nearly 8,000 member companies, BIAW promotes and protects the vitality of the building industry so more Washington families can enjoy the American Dream of owning a home. Learn more at:  www.biaw.com