The housing market has recovered, but sluggish entry-level construction is putting a squeeze on families that would like to buy their first home. A new report pins the blame on City Hall.
The culprit: Impact fees that builders have to pay municipalities when they get permits for new construction, says the report from Zelman & Associates, a housing research firm. These fees fund the local infrastructure needed to support a growing population—schools, transportation, environmental mitigation and utilities.
Cities boosted these impact fees after the downturn—even though builders were cutting prices—to make up for lost revenue. During and before the housing boom, these fees had supported municipal budgets, together with rising property taxes, which also stopped rising when prices fell.
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