Commentary: Proposed Seattle impact fees would boost housing costs, reduce affordability and supply. Growth pays for growth.

Last week, a trio of Seattle City Council members argued that Seattle was overdue for impact fees on developers. We didn’t write about it at the time, believing that with the minimum wage and local income tax we’d hit our Seattle limit for the time being. Here’s the crux of their argument:

All aspects of our transportation system require additional funding to meet growing demand. Schools in most neighborhoods are already packed, and residents of Seattle’s downtown — the fastest growing neighborhood in our city — are calling loudly for a public elementary and high school. Seattle Public Schools estimates it needs 28 new classrooms just to keep up with projected growth citywide, and 37 more to meet new class-size reduction laws. And it’s essential we continually improve and enhance our parks and community centers to address increased demand.

We believe impact fees represent a reasonable path forward to address some of the stated needs, but we disagree with the assessment that the city hasn’t pursued an impact-fee proposal because we already have property-tax levies or that it’s not a priority. On the contrary, in the last three years we’ve been steadily moving forward toward adopting impact fees. Like all things land use-related, we are never able to move as quickly as we’d like.

The council members argued that “growth should pay for growth.” And they wrote that today (August 1) the council would begin a process that could lead to the imposition of impact fees in early 2018. 

We comment on their proposal now because of two thoughtful responses in the Seattle Times. 

In an oped, Roger Valdez, director of Smart Growth Seattle, writes,

But does it make sense to impose fees that will contribute to higher production costs and increase the price of housing? Of course not. But shouldn’t, “growth pay for growth”? The fact is new development already does pay for itself while providing much needed housing. Impact fees would just add to an array of existing fees already boosting housing costs. Impact fees will make housing prices worse…

What will impact fees do to the cost of housing? A recent study by the city of Portland estimated that on average, “government fees” add 13 percent of the total development cost of housing.

He concludes:

When added to climbing housing-production costs and swelling demand, impact fees will only make much needed housing harder and more expensive to produce at a time when housing prices are rising because housing is scarce.

Instead of thinking up more ways to make housing more costly to produce, City Hall, if it truly cared about rising prices, would cut back on rules, fees and process so that new housing production could more easily meet surging demand.

Seattle Times business columnist Jon Talton also weighs in against the proposed impact fees.

On the Planet Seattle, however, a good deal of destructive policy comes from the left. Chief example is the demand for construction impact fees by some on the City Council and among candidates for mayor and council posts. The claim is to “make growth pay for itself.” And the implication is that developers are getting a free ride.

In fact, private developers already pay a variety of taxes and fees, including new construction sales taxes, excise taxes,  increased property taxes from turning a parking lot to a hotel or apartment building, and affordable housing fees in HALA rezoning. Office building developers pay a per-square-foot fee to fund child-care, preschools and day care centers, as well as a similar fee to create public open spaces downtown.

Talton, too, writes that growth is paying its way.

Indeed, growth has been paying for itself in this booming economy. For example, construction companies in Seattle paid $466 million in just the sales tax related to construction of buildings last year. Hotels, including new ones, paid $169 million in lodging taxes. A 2015 report found that a typical high-rise contributed $3.5 million in one-time construction revenues and $6.6 million in ongoing annual revenue.

This boom has allowed the city to increase its budget by a staggering 40 percent between 2013 and 2017, to $5.7 billion.

Loading down developers with a new impact fee would risk other unintended (?) consequences, chiefly sending development to Bellevue and elsewhere on the Eastside and even to the South Sound and Tacoma.

That, of course, is also the possible outcome of a new city income tax and rising minimum wage. This is another issue to watch.