development community has long argued that the imposition of impact
fees increases the cost of housing. According to some, these costs
have an inordinate impact on those attempting to create new
affordable housing. In response, many communities have developed
impact fee waivers, exceptions, and rebates to reduce the deleterious
effects on affordable housing.
communities waive or reduce development fees on affordable housing.
Antonio, Texas allows a reduction of up to 100 percent of
the local impact fee. The City ordinance requires the Council to
decide which projects qualify for the program on a case-by-case
basis. In contrast, Chicago
reduces, but will not fully eliminate, its open space impact fee for
certain types of housing. For example, a developer of an affordable
1,500 square foot home in 2000 would have paid approximately $100 as
an open space impact fee; considerably less than the $625 fee for a
market rate unit of the same size.
communities waive different types of fees. King County,
Washington does not require affordable housing developers
to pay road or school fees. Santa Fe, New
Mexico waives building permit fees for non-profit
affordable housing developers and reimburses these fees for
profit-based developers who certify that the units are affordable. In
addition, Santa Fe exempts affordable housing from capital
development impact fees and utility expansion charges.
than waiving fees, other communities have created funds to reimburse
developers for the cost of paying fees. Fort
Lauderdale and Albuquerque
are two such communities that have programs offering fee rebates to
developers of certain types of housing.
Benefits to Focus on Affordable Housing
communities limit the fee waiver or fee rebate benefits to affordable
housing developments, how they define "affordable housing"
varies from place to place. Some communities offer the benefit to
certain affordable housing programs that they have identified.
Hartford, Connecticut waived certain permit fees for properties built
or rehabilitated under its Urban
Reno, Nevada waives park fees or
dedications for houses developed under its "Entry
Level Housing Program."
communities define eligibility by the size of the development. Greensboro,
North Carolina offers exemptions and refunds to developers
who build housing that meets certain size requirements. Detached,
single-family, owner-occupied homes can qualify if the unit is 1,200
square feet or less and an attached unit can qualify if it is 1,000
square feet or less. Rental units qualify for a fee refund if the
owner rents 60 percent of the units in the development at or below
the applicable fair market rent.
communities base the eligibility for fee waivers or rebates on the
incomes and payments of those who will eventually reside in the
housing. Fort Lauderdale defines housing as affordable when it meets
two criteria: residents earn up to 80 percent of the median area
income and residents pay no more than 30 percent of their income for
housing. Units constructed under these provisions may be offered for
sale or rent.
King County, on the other hand, differentiates between
renters and homeowners. In order to qualify for the fee waiver,
rental housing must serve those earning below 50 percent of area
median income. When
looking at housing for sale, the income limit is 80 percent of area
fees have become an important tool that local governments use to
finance public infrastructure. These fees can also help keep local
tax rates down. Many communities, however, have acknowledged that
these fees have created an undue burden on those least able to afford
increased housing costs. These communities have developed programs to
waive or reimburse fees that would otherwise add to the cost of
producing affordable housing.
your community is considering a reevaluation or revision of its
impact fee ordinance, please take a few moments to see how other
cities have addressed this issue. If your community is one that has
taken steps to address the issue, consider sharing your solution with
us by calling 800-254-2691, option 4. And who knows – you might
just find yourself in the pages of a future issue of Breakthroughs!
States Allow Tax Preferences for Renters
of the largest federal housing subsidy programs is the homeowner's
property tax deduction allowance. Renters, however, who typically do
not pay property taxes directly, cannot take advantage of this
federal housing subsidy. Three states – Connecticut,
Massachusetts, and Minnesota – have decided to provide eligible
renters with a property tax deduction under the state income tax
system. These states allow renters to recoup a portion of the rent
they pay from the state government.
provides a rebate grant to certain Connecticut residents for a
portion of the rent and utilities. The rebate is based on a
graduated income scale.
provides a credit against state income taxes. Taxpayers who rent can
claim a credit for a portion of rent plus water and sewer payments
that exceeds 10 percent of their total income for the tax year. A
cash refund is available to those taxpayers with no tax liability.
allows all qualified renters to request a tax refund for a portion of
program is for those who are elderly or totally disabled and whose
income does not exceed certain limits. In 2001, the single person
household income limit was $25,400. For all other households, the
limit was $31,100. Connecticut also compares a claimant's rent
to his or her income and requires that five percent of the qualifying
income cannot exceed 35 percent of the total rent and utility
Massachusetts program allows certain taxpayers 65 years or older to
claim the credit. The state also imposes a limit on the income of
those who qualify for the program. For 2003, total income could not
exceed $43,000 for a single filer, $54,000 for a head of household,
and $64,000 for taxpayers filing jointly. In addition, taxpayers
receiving a federal or state rent subsidy or those renting from
landlords that do not pay property taxes are not eligible for a
Minnesota, any taxpayer whose income does not exceed a certain amount
can request a refund of a portion of rent paid. The maximum income
limit is $62,019 for households with five or more dependents. The
income limit is $3,000 higher for households with elderly or disabled
heads of household.
extent of the benefit depends on the household income, the number of
dependents, and amount of the imputed property tax the tenant has
paid. The maximum grant in Connecticut is no more than $900
for married couples and $700 for single persons.
In Massachusetts, the state requires that the rental payments exceed
10 percent of total income. Upon exceeding that threshold, the
maximum benefit is $810. The maximum benefit in Minnesota is $1,280.
states have recognized that certain low- and moderate-income renters
would benefit from a program that allows them to recapture a portion
of the rent they paid during the previous year. While using slightly
different approaches, Connecticut, Massachusetts, and Minnesota have
each taken positive steps to provide renters with a tax benefit
similar to the one that was previously available exclusively to
Addressing the High Cost of Building: Keeping a Lid on Liability Insurance
recent spate of legal actions against housing contractors has created
a problem for builders, whose liability insurance rates have
increased dramatically. In some instances, builders have found that
liability insurance is no longer available. While this litigation has
an impact on all contractors, it could also create serious
difficulties for those who specialize in affordable housing.
the chilling effect these actions could have on construction, some
states have enacted legislation to establish a process whereby the
builder has an opportunity to remedy the construction defect before a
lawsuit can be brought. As of May 2004, 21 states have enacted some
form of "notice and opportunity to repair" legislation.
The legislative approaches between the States of Florida and
Washington are compared below.
only owner-occupied residential properties are covered under the
"notice and opportunity to repair" legislation.
Washington's statute defines a residence as a
single-family house, duplex, triplex, quadraplex, or an individually
owned unit in a multi-unit residential structure.
Florida's statute also includes manufactured and modular housing in
Homeowners and Construction Professionals Defined
of the new statutes define who falls under the umbrella of this
legislation. Washington and Florida define the claimant as an
association or homeowner. They also include subsequent purchasers as
homeowners. Florida, however, excludes contractors, subcontractors,
suppliers, or design professionals from those who can file a lawsuit
under the Florida law.
defines a construction professional as an architect, builder, builder
vendor, contractor, subcontractor, engineer, or inspector who
provides any type of construction services. The Florida statute does
not use a single term for those who fall under the law, but rather
defines separate terms for contractor, design professional,
subcontractor, and supplier.
of the statutes require that communication between the parties be in
writing and establish specific timeframes for action. Washington's
and Florida's statutes require the claimant or property owner
to notify the building professional and the court of a list of known
or initial construction defects. The list must contain enough detail
to determine the general nature of each defect. Washington further
requires those who wish to file a claim to notify the construction
professional of the problem at least 45 days before they file a claim
in court. In Florida, the deadline is 60 days.
general, the "notice and opportunity to repair" statutes
also require the building industry to respond to the claimant in
writing. Washington has a two-phased process for responding to the
claim. A construction professional has 21 days to respond in writing
to the claim and may request to inspect the property, offer to
settle, offer to purchase the property, or dispute the claim. If the
claimant accepts the request to inspect the property, the
construction professional must inspect the property and, within 30
days of the inspection, respond in writing to the claimant.
claimants have the option of accepting or rejecting the construction
professional's offer to repair the defect or to pay a sum to
have the defect repaired, but must do so in writing within 30 days.
According to the statute, if the offer is not accepted within 30
days, the construction professional can withdraw the offer.
in Florida provide a much shorter timeframe for resolving
construction defect disputes. The statute requires the contractor to
inspect the dwelling within five business days of receiving the
notice of claim. All parties must respond in writing to the claimant
within 25 days. As in other states, construction professionals can
offer to remedy the defect or settle the claim with a monetary
payment. In Florida, the claimant is assumed to have accepted the
offer unless they reject the offer in writing within 15 days.
other deadlines are contained in the offers made by the construction
professional. In Florida, however, an offer to settle the claim with
a payment must state that the payment will be within 30 days of the
claimant's acceptance of the offer.
liability insurance expenses have the potential to increase the cost
of housing; a troubling thought for home buyers in general, but
especially so for those who need affordable housing. In addition to
Washington and Florida, 19 other states have taken slightly different
routes to address this potential problem in affordable
housing. One common denominator, though, is that they have all sought
to formalize a process for settling these disputes before expensive
litigation begins. In doing so, they have reduced the chances that
those who develop and build affordable housing will be forced to
increase prices and make housing less affordable.
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