According to a recent article, cities all over the country are engaging in a new disturbing trend as a response to stagnant new construction. Marin, California; Manatee, Florida; Meridian, Idaho and Albuquerque, New Mexico are among a growing number of cities that have chosen to reduce, suspend, or cancel development impact fees, the charges imposed on new development by local governments to offset the cost of growth. Impact fees pay for critical municipal services such as schools, infrastructure, and police and fire protection. In 2008, the average fee for a single family residential unit was over $11,000.
The problem faced by developers in these cities is not that the cost of home construction is too high. The problem is weak demand for new homes. Further subsidizing new development will not address the problem of demand. Eliminating impact fees is not going to jump start cities and towns out of economic recession. It will only further burden local budgets and taxpayers at a time that they can scarcely afford it.