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Breakthroughs: Successful Local Strategies for Affordable Housing

January 2006
Volume 5, Issue 1
 
          

Florida Task Force Studies Need for State Regulation of Impact Fees


A PowerPoint slide that reads 2005 Florida Impact Fee Survey.
The Florida legislature recently enacted SB 360, which makes a number of significant changes to Florida's Growth Management laws and provides major funding for public infrastructure. The new law also creates the Florida Impact Fee Review Task Force whose responsibility it is to examine the administration of impact fees and recommend whether Florida needs to adopt specific enabling legislation. An impact fee is a charge levied on new homes to pay for the construction of off-site capital improvements that benefit that development.

Impact Fees and the Florida Experience

In contrast to other states, local government authority to assess impact fees in Florida derives from home rule authority and case law, rather than a state enabling statute. The Florida Constitution gives local governments broad authority to provide fire protection, parks and recreation facilities, transportation facilities, schools, libraries, and water and sewer services. Local governments also may use a variety of funding mechanisms to pay for these services without having to rely on state enabling legislation. Impact fees are one of several financing mechanisms used by local governments to provide these services or facilities. State limits on impact fees only affect special fire control districts (Section 191.009(4) and developments of regional impact (Section 380.06).

Florida Courts Allow Fees but Set Limits

As early as 1976, Florida courts have considered the legality of impact fees. The courts have consistently held that an impact fee is legal as long as the local ordinance contained certain characteristics. A fee is legal, for instance, if it is:

  • Only on new development that requires an expansion of public facilities;
  • Proportionally related to the need;
  • Earmarked for capital facilities and not operating costs;
  • Used for facilities that benefit those who pay the fee; and
  • A one-time charge, though collection may be spread over time.

Use of Impact Fees in Florida

According to a study by the Legislative Committee on Intergovernmental Relations, 249 local governments reported charging 474 different impact fees in their Annual Financial Reports to the State Chief Financial Officer for FY ending 9/30/03 or the State Department of Education for FY ending 6/30/03. Local use has grown steadily. According to the same study, between 1993 and 2003, the number of government entities charging fees increased by 55 percent and the amount of revenue generated by impact fees increased by 353 percent. More information on the use of impact fees can be found in the attached table.

Previous Reviews of Funding Needs and Fees

The current review follows several other efforts undertaken by various bodies in the state. The most recent effort was in 2004, when the Senate Committee on Community Affairs issued a report on local government impact fees. The study reviews existing authority and court decisions. Staff of the committee also interviewed various local governments, home builders, and realtors as part of the study. Ultimately, the committee concluded that there was no consensus about the need to codify impact fee case law and therefore made no recommendation to the legislature.

Current Responsibilities

According to Rip Colvin, Executive Director of the Legislative Committee on Intergovernmental Relations, the legislature instructed the task force to investigate a number of issues, including:

  • Accounting procedures for collecting and spending fees;
  • Providing public notice before enacting fee ordinances;
  • Developing and using criteria for calculating fees; and
  • Establishing methods to reduce the impact on affordable housing.

The task force is hearing from those who support state enabling legislation and those who consider the existing system, based on case law, to be sufficient. According to Linda Shelley with the Florida Home Builders Association, the industry supports state legislation because industry members continue to be concerned that only new development pays impact fees. These fees increase the cost of housing, thus reducing housing affordability - especially for first-time homebuyers. She also observed that home builders have specific concerns with the way local authorities administer impact fees and suggests ten "fairness principles" the legislature should use in adopting state legislation. These principles include:

  • Providing adequate notice of fee increases;
  • Accounting for all impact fees and expenditures;
  • Allowing alternative timeframes for paying fees;
  • Using current data to estimate costs and fees;
  • Establishing a better method of calculating the proportional demand;
  • Insuring that fees benefit those paying;
  • Restricting administrative fees;
  • Setting timeframes for developing infrastructure or refunding fees;
  • Paying only a fair share but with credits for taxes paid; and
  • Establishing an enforcement mechanism.

Shelly contends that such legislation will guarantee that new development pays its share, but no more, of the cost of new infrastructure. She also contends that such legislation will ensure that local authorities impose impact fees in a more predictable manner.

Local authorities urged the task force to leave the existing system in place. Randal Young, a local government consultant, argued that existing case law guarantees that new development will pay only for reasonably related costs and prevent abuses. He concluded that:

  • Florida’s rules are established;
  • Florida’s rules cover more topics than many other states;
  • Many other states adopted laws because there was no home rule authority to do so;
  • Enabling laws in other states neither provide all the answers nor prevent litigation;
  • Home rule allows local governments to decide how to pay for local infrastructure; and
  • Variety allows local governments to tailor impact fees to local circumstances.

Speakers from several counties added that if the imposition of impact fees creates a hardship on affordable housing, the local government has the authority to waive such fees. Teresa Jacobs, Orange County Commissioner, said that the county currently offers discounts for affordable housing developments.

Continuing Discussions

Discussion and debate will continue until early next year, when the task force will recommend a course of action to the Florida legislature. Be sure to read the February issue of Breakthroughs, when we’ll look at the task force’s recommendations.

Ongoing HUD-Sponsored Research

In a major forthcoming work, the U.S. Department of Housing and Urban Development will publish a guidebook for local officials that will serve as a guide in determining fair and equitable impact fees to fund public infrastructure that serves new housing developments.

 

Manufactured Housing Barriers Fall in California


A photograph of two story manufactured house with yellow vinyl siding.
In the late 1970s, California was among several states looking for ways to ease the rising cost of new homes. At the time, the states regulatory barriers to widespread use of manufactured housing effectively suppressed this alternative form of construction.

According to Steve Hullibarger, the president of a manufactured housing consulting firm in California, in the following decade, the state legislature began enacting a series of laws designed to remove unreasonable barriers to the placement of qualifying manufactured homes in both urban and rural neighborhoods. By establishing certain standards, qualifying manufactured homes were deemed compatible with existing neighborhoods, and new home buyers were given more affordable housing choices.

The first key statute, Government Code §65852.3, was enacted in 1980. Cities and counties were required to issue building permits to applicants wanting to place visually compatible manufactured homes on any lot, with minor and insignificant exceptions. The law is effective in the sense that it does not mandate quantitative specifications, only that elements of the home must match the architectural context of the street. Development minimums, such as setbacks, apply as they would to a site-built home. Eventually, several other laws were enacted to address problems that arose after 1980.

Hullibarger said that developers and builders approached manufacturers capable of providing the many cost and speed advantages inherent in factory construction. In response, California manufacturers started changing their homes' characteristics, away from the familiar "doublewide," and toward traits more common to site-built homes: interior layouts, garage adaptability, more complex exterior articulations, and a wider variety of roofing and exterior materials.

New manufactured homes - built by for-profit and nonprofit developers - have expanded buying opportunities for thousands of Californians who might otherwise have been left behind in the rising home cost crunch.

Over the years, as land was developed and platted, it was common for restrictive covenants to include boilerplate language forbidding the placement of most any type of factory-constructed dwelling in the subdivision. Inasmuch as these deed restrictions are a private matter between buyers and sellers of property, it was rare that an existing restriction on manufactured homes would be successfully overturned in court.

The California legislature decided in 1987 that any new California Code & Regulations language, for those recorded after that date, would be unenforceable with respect to barring manufactured homes. In effect, manufactured homes could no more be discriminated against than any particular class of persons.

The application of these laws was uneven in the state. Some local jurisdictions sought to discourage development that included manufactured homes by forcing applicants to run a gamut of bureaucratic processes. Coming to the rescue, the state enacted what became Government Code §65852.4, which requires equal permit application processes for site-built and manufactured homes.

To increase the efficiency with which governmental agencies can use manufactured homes in public housing or redevelopment, Government Code §18062.8 permits public agencies to directly acquire homes from the manufacturers when providing housing for low- and moderate-income households. This eliminates the need to buy the homes through a dealer or middleman.

Finally, recognizing that more and more manufactured homes were being used by developers as a substitute for onsite construction, the legislature enacted Government Code §18062.9, giving licensed contractors conditional direct access to the homes from the factories.

"Over time," Hullibarger says, "These collective roll-backs [of] unreasonable regulatory barriers encouraged entrepreneurs to find and acquire vacant lots in most of California's larger cities. Many of these lots were formerly considered unbuildable, because of the high cost of constructing one entry-level home at a time, and because of the exposure to many risks inherent in urban areas."

Some of these entrepreneurs pointed out to local governments that they do not check the HUD-approved construction plans for manufactured homes, nor do they undertake several steps of inspection. Some local governments have responded by significantly reducing permit fees, and plan-check fees in particular, for manufactured home installation permits. In an entry-level house, this constitutes a measurable savings.

According to the California Manufactured Housing Institute, one third of new manufactured homes in 2004 were sited in subdivisions and urban infill locations, thus making them a competitive option to stick-built housing in urban settings. This is a significant departure from typical siting of manufactured homes in the rest of the country. In no other state do regulations favor the urban use of manufactured homes to the extent they do in California.

The real winners in this quarter-century trend have been first-time home buyers who formerly had few living choices other than renting. For many of these families, a second fortuitous event took place when the time came to sell and move on. It is now clear that the market will value a manufactured home that matches the aesthetic context of its neighborhood at the same price as it would value a site-built home. And for many who were able to save money at the time of their initial purchase, the return on their investment has been even sweeter.



 Code Reforms Aid Rehabilitation Efforts


A photograph of the cover of the International Existing Building Code.
In October, we posted an article about ongoing efforts to modify building code requirements that affect the rehabilitation of existing housing. Rehab is, of course, a viable strategy for preserving and expanding a community's affordable housing stock. In the past, however, burdensome regulatory requirements often discouraged rehab by making it cost-prohibitive. In 2003, reform efforts championed by the U.S. Department of Housing and Urban Development (HUD) and implemented by several individual states resulted in promulgation of the International Code Council's (ICC) International Existing Building Code (IEBC). "This code," says ICC Manager of Standards Ed Wirtschoreck, "allows communities to safeguard the public and improve existing building stock, without mandating the requirements (and expense) of new construction." In this follow-on article, we examine how the IEBC's code requirements are proportional to the amount of work proposed. Further, the new code delineates the difference between repairs, alterations, and changes of occupancy. The code also addresses requirements affecting additions and historic houses.

Repair

According to Chapter 4 of the 2003 Code, repair is "the restoration to good or sound condition any part of an existing building for the purpose of its maintenance" (Sec. 202). Building officials can permit contractors to use materials similar to existing materials, even if those are not permitted by other building codes. For example, an owner wishes to patch plaster walls in a structure but not undertake other work. Under this section of the IEBC, the code official can permit the owner to patch the walls using like materials, even if those materials would not meet code requirements for new construction.

Alterations

The drafting committee expanded the term "alteration" by providing three levels of alterations and adjusting code requirements based on the amount of work anticipated. Level 1 alterations, described in Chapter 5 of the new code, involve removing and replacing an element that serves the same purpose. For example, if a builder wants to remove old doors and replace them with new doors, the builder would have to ensure that the new doors meet code requirements. For this level of work, however, the code does not require the builder to bring "life safety" activities, such as installing fire protection systems, partially or completely enclosing vertical openings, replacing unsafe interior finishes, or ensuring adequate means of egress, into compliance with the current building code.

Chapter 6 describes Level 2 alterations as those that involve reconfiguring space, adding or removing doors or windows, extending systems or installing additional equipment. For example, a builder proposes to relocate a door or create a new door opening. He or she would need to ensure that any work that affects structural, electrical, or plumbing systems complies with the applicable code. The builder would not have to bring the entire structure into compliance with the new construction code.

The IEBC classifies work that affects more than 50 percent of the aggregate area of the building as a Level 3 alteration. ICC regulations for this level of work are contained in Chapter 7 of the IEBC. Owners planning such extensive work are required to meet a number of additional requirements. The local building official may require improvements to the building's structural systems, life safety systems, and mechanical, plumbing, and electrical systems.

Change of Occupancy

Many owners and builders are considering the conversion of non-residential structures to residential structures, or are seeking to change the density of a current residence. For example, a recent article in Breakthroughs described the conversion of a motel into affordable housing. The ICC defines this type of activity as a "Change of Occupancy." In these cases, Chapter 8 of the IEBC contains a formula of "hazard indices" that can be used to determine the level of risk to new occupants. The higher the risk, the more fire safety requirements apply. Say there's an owner who wishes to convert a single-family home into a multi-unit apartment. The code may require that the owner provide additional means of exiting the building in case of a fire. Depending on the extent of construction, the building code requirements in Chapters 6 and 7 for building structure, electrical, and plumbing elements would also apply. However, not all changes of occupancy require extensive egress reconstruction. Should an owner wish to convert a commercial structure into multifamily housing, many of the egress requirements for the commercial structure could apply to the multifamily use. The owner would be able to use existing egress, thereby reducing the costs of rehabilitation.

Additions, Historical Structures, and Relocated Buildings

The IEBC also provides contractors and code officials with guidance on adding space and rehabilitating historic structures. Owners proposing to add space to an existing structure must abide by the new construction sections of the ICC codes. Chapter 9 of the IEBC defines "addition" as an extension or increase in floor area, number of stories, or height of a building. The code also provides guidance in the rehabilitation of historic buildings. Chapter 10 recognizes the need to maintain the historic nature of the building while ensuring the safety of those using the building.

The code also addresses structures that owners have moved from one site to another. While the IEBC does not define the term "relocated or moved buildings," owners must follow requirements for location on the lot and the foundation that are found in the International Building Code or the International Residential Code.

Alternative Compliance Mechanisms

The IEBC also allows owners to comply with its provisions by using alternative methods that are described in Chapter 12 of the Code. The building code official uses a formula to assign a score based on the existing condition of the building and any proposed improvements. She then compares that score to minimum scores for fire, egress, and general safety, and can authorize work where the building and project score is above the minimum standard. Should the score be below the minimum, then the building official can recommend, or the owner can propose, additional work to bring the score up to the predefined minimum score.

Conclusion

Economic viability is an important consideration when contemplating improvements or repairs to older or damaged structures, or when attempting a change of occupancy from commercial to residential use. The goal of code reform efforts (which have now culminated in the IEBC) is to reduce costs and encourage rehabilitation and redevelopment, while protecting the safety of those occupying the units. Preliminary results from New Jersey's efforts indicate that rehabilitation activity has increased. If this trend continues and the use of the IEBC encourages redevelopment elsewhere, then older homes will continue to provide a valuable source of habitation - and architectural history - for years to come.

Note: This article does not include an exhaustive review of the International Existing Building Code and all of the requirements contained in the Code. Builders and owners are strongly encouraged to talk to local codes officials before planning work on existing structures.

 

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