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July 16, 2012

Too Many Bites at the Apple: Complexity gets in the way of housing approvals

Agnès Artemel

Agnès Artemel is President of Artemel & Associates, Inc., a planning and economic development consulting firm.

Lisa Sturtevant is Deputy Director of the George Mason Center for Regional Analysis and Assistant Research Professor at the School of Public Policy.

The future prosperity of the Washington region depends critically on the ability to supply sufficient housing—in the right places, of the right types, and at the right prices and rents—to accommodate population growth.  To simply house the 1 million new workers coming here, the region needs to add 731,000 new housing units over the next 20 years.  Additional housing will be needed for the 1.8 million anticipated replacement workers.  Our regional planning efforts, notably the Metropolitan Washington Council of Governments’ Region Forward, emphasize the benefits of locating new housing in close proximity to transit and employment centers.

Local jurisdictions, through their comprehensive plans and zoning ordinances, dictate the types and locations of new housing units and directly influence their prices and rents.  The growth policies, regulations, development review processes, fees, and priorities of localities are at the heart of whether or not we will be able to provide the housing necessary to ensure the region’s economic vitality and quality of life.  To what extent are local jurisdictions supporting—or impeding—the development and construction of sufficient housing units?

Lisa Sturtevant

The Center for Regional Analysis, along with affiliate researchers at Artemel & Associates, recently completed a survey of the regulatory processes and fees associated with delivering new housing units in jurisdictions across the Washington DC metropolitan area.  Local government regulation and fees can add up to $60,000 to the cost of building a single-family home.  It is no surprise that local government regulations and fees imposed during the development approval process add to the cost of a delivered new housing unit.  In addition to application, land development review and building, mechanical, plumbing and other fees, developers are often required to undertake specialized studies, such as transportation impact analyses, noise analyses, and landscape and urban design studies.   In rezoning cases, local jurisdictions are able to negotiate for a wide variety of public benefits, all of which add to the cost of providing new housing units, and are not necessarily items that new homebuyers or renters would request.

Proffers, impact fees, and excise taxes (the term depends on the jurisdiction) are intended to mitigate the impact of development, particularly related to schools, roads, and police/fire/rescue services, libraries and other community facilities.  The size of the impact fees can vary tremendously across the region.  In Loudoun County, for example, developer proffers can range between $45,000 and $60,000 per single-family unit and between $30,000 and $40,000 per townhouse. In Montgomery County, impact taxes associated with new development range from $30,000 to $35,000 per single-family or townhouse unit; for multi-family units, the impact taxes are around $8,000 to $10,000 per unit.  In Fairfax County, which follows a different process not as closely tied to the provision of adequate public facilities, the requested cash proffers tend to be much lower, between $6,000 and $12,000 per single-family unit and $4,000 to $6,000 per multi-family unit.

Perhaps more consequential to the private sector decision to develop housing units is the tremendous uncertainty associated with the process and contributions associated with residential development.  While the development review process is complex throughout the region, some local jurisdictions provide more transparency in the requirements.  In an in-depth study of the regulatory process and fees in Montgomery County, the School and Transportation Impact taxes are based on annual analysis of actual costs of provided services and are clearly published for each type of housing development in different parts of the county.  Several jurisdictions in Virginia also have published, formula-based proffer systems, including Loudoun, Prince William and Spotsylvania counties.  Other Northern Virginia jurisdictions have negotiated proffer systems, meaning that the total amount of developer contributions requested by the locality is not known up-front and can vary widely from project to project.

In all jurisdictions, the development review and approval process is the mechanism through which many community benefits are accrued.  The provision of affordable housing—while an important stated goal in almost all jurisdictions across the Washington area—is just one of many contributions local jurisdictions require or request from developers building housing in their communities.  Open space, public art, bike racks, recreational facilities, utility undergrounding—these are all commonly part of the development review and approval process.  And while all of these benefits may be worthy projects that enhance the quality of life in the community, the provision of these amenities and services come at the cost of resources for additional housing affordable to the spectrum of workers and families in the region.  While affordable housing is a stated priority in almost every jurisdiction, the reality is that it is only one of many elements localities seek to gain through the residential development process.

The fees and costs, the complexity, and the lengthy timeframes associated with the residential development review and approval process are hampering the ability to produce sufficient housing in the Washington region.  The most important thing local jurisdictions can do is to prioritize the creation of new housing units in their comprehensive plans, zoning, and development review processes.  One step that can be taken now is to streamline the regulatory process to make it more transparent and predictable.  Montgomery County is currently working on efforts to combine several review and approval steps into one, which would simplify the process and reduce costs to developers.  Other local jurisdictions should critically examine their processes, including the basis for impact fees and proffers and the timeframes and potential loci of uncertainty within the process.

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