You Got to Be Kidding Me!

Economic Illiteracy

Posted in Economics, Urban Planning by Stacy McMahon on April 11, 2007

It’s not just for socialists anymore. The Home Builders Association of Virginia is fighting impact fees.

“When the governor released his amendments he included an entirely new component that had never been a part of the bill and no public opportunity for comment,” [Home Builders Association president Mike Toalson] said. “What he embedded was new road impact fee authority for 67 localities in Virginia, including Culpeper, Fauquier, Green, Louisa and Orange counties.”

[…]

“He embedded it in the bill HB3202 in a form we could not get out,” Toalson said. “Normally, we get an opportunity to vote but it didn’t happen that way. It was crafted in a way that we couldn’t touch it.”

The homebuilders association gets a vote on state legislation? That’s an interesting concept that I’d like to hear more about. But for now let’s focus our attention on this bit of profound insight (emphasis added):

“Are you going to take the cost of [impact fees] and just eat it,” Toalson asked the room full of builders, real-estate agents and bankers. “No. You’re going to pass it on to the consumer. And then what happens? All the neighbors’ houses become more expensive. And then what happens? Real estate taxes get higher. But it’s, ‘You’re the bad guy. You’re paying your fair share.’ And it’s coming sooner rather than later.”

For the uninitiated, “impact fees” are when a municipal government charges a developer to cover the cost of extending municipal services to the new housing units. Typically these include water and sewer lines, road improvements (traffic signals and extra lanes) and soforth. The developer doesn’t like paying them for the obvious reason — it’s another upfront cost, though as our budding economics professor notes above, it gets passed on to the buyers just like any other cost. The other choice is for the rest of the local residents to pay for it through taxes, so really the fairest solution is for the new development to pay for all the costs associated with it. To pay its fair share, you might say…

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