Housing Affordability Institute has released a new white paper examining street impact fees and housing affordability. Street Impact Fees are funds paid to municipalities to fund unspecified future road improvements. These fees, included in a new home’s price, are used on collector roads outside of the development footprint and are in addition to the in-development infrastructure paid for by new residents.
In Minnesota, street impact fees are not authorized and have been struck down twice by the Minnesota Supreme Court when municipalities have attempted to use them.
Unlike other funding options, street impact fees are folded into a mortgage. At today’s interest rates, excluding builder overhead, taxes, and real estate commissions, homebuyers will pay nearly double over the life of a 30-year mortgage for the impact fee relative to a special assessment.
Street impact fees are a tool of political convenience, providing local governments the ability to tax new residents before they move into their new homes. A tax which is tacked on to their mortgage.
Given the added costs to homebuyers due to mortgage financing, the affordability aspect of street impact fees presents a far less fair deal to those who pay this fee than when the alternatives could be used.