The Impact of Fees on Georgia’s Housing Supply

Repeat after me: Our housing affordability problem is about supply.

Our housing affordability problem is about supply.

Our housing affordability problem is about supply.

Georgia, like much of the United States, has not been building enough housing. An estimate by Freddie Mac put the national shortfall at 3.8 million units, or about one unbuilt home per 87 residents. Georgia’s problem is even more acute: A recent U.S. Senate report put our state’s shortfall at more than 364,000 units, or one per 30 residents.

So, every time you hear someone talk about a solution for housing affordability, or a housing policy generally, evaluate it through this lens: How will it affect incentives to build more homes? After all, our housing affordability problem is about – all together, now – supply.

That’s why it was instructive to see the Georgia Public Policy Foundation’s new study of development impact fees in our state. Fifty-four local governments in Georgia are authorized to levy these fees on new homes, including single-family houses, apartments, townhouses and condominiums. At a time when Georgia needs to build hundreds of thousands of additional homes just to fill the shortfall, these fees are making new homes more expensive by thousands of dollars.

Development impact fees were created by a state law enacted in 1990, just when Georgia’s population was really beginning to boom; the 1990 census was the first to show our state had added 1 million new residents within a single decade. The stated objective of development impact fees was to ensure we experience “smart growth,” meaning primarily that infrastructure keeps up with the additional needs brought by new residents.

Impact fees can be levied on many types of new construction, not only residential but commercial as well. The revenues they generate can be used to build new infrastructure for water and sewer, roads and bridges, parks, libraries, and public safety facilities such as police and fire stations. They cannot be used for schools, hospitals, solid waste services or operational costs.

In theory, then, these fees ought to be set based on the cost of providing these various types of infrastructure. In practice, they tend to be highest in places that are trying to put the brakes on growth.

The highest fees charged by a single government – we’ll address combined fees a bit further down – are by the city of Milton, which levies about $7,758 for any type of new home. Following Milton are two of its fellow north Fulton cities: Sandy Springs ($6,855 for single-family homes, townhouses or condos; $6,530 for apartments) and Alpharetta ($6,690 for all types).

On the other end of the spectrum, there are 10 jurisdictions that charge $1,000 or less. The lowest, among those cities and counties that charge a fee, is $229 in the city of Hampton, in Henry County.

As I mentioned, though, there are some places where both the city and county governments charge development impact fees. These double whammies push several cities well up the list. For example, Cumming in Forsyth County hits a combined $8,393 for single-family homes, making its fees the highest in the state. Stockbridge and McDonough in Henry County, along with Canton in Cherokee County, all soar beyond $5,000 when both city and county fees are taken into account.

And remember Hampton, with its comparatively small impact fee of $229? Add Henry County’s fee, and the combined levy swells to $3,774.

All of these fees add up. Just the 10 jurisdictions with the largest revenues from impact fees collected a total of more than $46 million in their most recent fiscal year.

Now, if done correctly, these fees are paying for public infrastructure that all taxpayers would otherwise have to subsidize. The question is whether the revenues really are being set, collected and allocated correctly. That will be the subject of a second study soon.

Until then, ask yourself how these fees might affect the new housing stock Georgia desperately needs.