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CPW increases fees, encourages affordable housing
By Rachel Pleasant
Staff Writer
Charleston’s Commissioners of Public Works recently handed down increased impact fees along with a plan to encourage developers to build affordable housing.
Late last month CPW approved increased residential water and residential sewer impact fees. Residential water fees will increase from $1,190 to $2,200 and residential sewer from $1,820 to $2,650.
The increases will be effective Jan. 30, 2006. Impact fees are charged on new homes to help pay for expansion of the water and sewer system to help accommodate growth.
To help offset the cost of the impact fees to certain consumers, CPW also accepted a plan to eliminate the $500 engineering fee on both the water and sewer fees, said John Cook, CPW’s general manager.
Details are still being worked out, but the basic requirement for receiving the waived fee is that a home would have to be considered affordable to someone making 80% or less of the median income in an area, Cook said.
The plan marks the first time CPW has taken on a widespread effort to offset impact fee costs. In the past, it has helped customers on a case-by-case basis, usually by financing the fees.
“I think the impact fees are just getting to be up there,” Cook said, explaining why CPW took such a step. The engineering cost, he said, was considered a “soft” cost, making it easy to eliminate in order to encourage builders to construct affordable homes.
The engineering fee waiver will be administered with help from the Lowcountry Housing Trust, though just how the program will be carried out is still being worked out, Cook said.
The Charleston Trident Home Builders Association is pleased CPW took such a step, though the association had long pushed for additional action.
The builders association pitched an idea to CPW that would help reduce the markup on lots, which are passed on to consumers.
“Right now, a developer pays impact fees up front. If you have 500 lots times $5,000 in fees, that’s $2.5 million,” said Phillip Ford, the association’s executive vice president.
The problem is developers usually don’t sell lots for about two years after they borrow the money to pay impact fees. Between the time that money is borrowed and the time a developer sells the land and recoups his money, interest is charged. That interest is passed on to the buyers, Ford said.
“A lot may have been $50,000, but now it’s $55,000 because a developer had to borrow money,” he said.
The builders had suggested other options, including having the developer pay half the fees up front and the builder paying half the fees at construction.
It is unlikely CPW will implement that idea, Cook said.
“Our board has been very supportive of developers having to pay impact fees at the same time CPW has to pay for improvements. CPW has to pay for capital to serve a new development. Our board has been pretty consistent that the developer should have to borrow money at the same time CPW has to,” he said.
The new impact fees, Ford said, will make a difference to legions of consumers.
“For every $1,000 a home price increases, 800 to 900 people are priced out of buying a home,” he said. “That’s a pretty good amount of people.”
The impact fees come at an especially precarious time for potential homebuyers as material prices are on the rise, Ford said.
The average price of a new home in August was $283,400, according to the National Association of Home Builders. The same time a year ago, it was $272,200, and in 2000, it was $202,400.
The price per square foot of a new home in the South was $61.38 in 2000. Last year it was $72.50.
“It’s a scary thing for the consumer. It’s quite scary if you live in the Lowcountry and you see how fast prices are going up, and now we’ve had hurricanes and materials costs going up,” Ford said.
“We all should be worried about it. It can really cause problems and can be harmful for the economy long-term. It would have been a great thing to reduce the pass-on costs. It would have been something new to try.”
CPW is always open to new ideas on how to offset the effects of impact fees, Cook said. The last time CPW raised impact fees was 2000.
Rachel Pleasant is a staff writer for the Business Journal. E-mail her at rpleasant@charlestonbusiness.com.
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