NCPA - National Center for Policy Analysis

HOW GOVERNMENT OFFICIALS INCREASE HOME PRICES

February 8, 2010

Policies that increase tax revenues and regulate the growth of communities have a direct impact on the cost of construction in Washington state.  Lawmakers use a variety of tools to control growth and manipulate revenues, such as building, utility and impact fees, land use regulations and business taxes.  The increased costs affect the competitiveness of businesses, as well as prices consumers must pay for the goods and services, according to a new report authored by Brandon Housekeeper, a policy analyst with the Washington Policy Center. 

Other findings: 

  • In the construction industry policymakers specifically use permit fees, impact fees, land use regulations and direct taxes, all of which add directly and significantly to the cost of construction in our state.
  • Government policies added as much as 28 percent, or $67,400, to the cost of a typical single family home in Olympia; in the City of Vancouver the government-added cost to a typical home is approximately $54,000 or 25 percent; and in Spokane it is about $38,000 or 21 percent.
  • A recent performance audit by the Washington State Auditor's office found that local officials sometimes imposed fees improperly, collected too much in impact fees, and identified several ways local officials could reduce costs and maximize benefits.
  • Conservative estimates by industry sources concede that government officials add around 17 percent to the price of a typical home. 

The added cost of government has an effect on business owners' ability to remain competitive, as well as consumers' ability to afford goods.  As state and local officials continue to ignore or downplay their role in adding to the cost of construction in Washington, they will continue to put local communities and the state as a whole at a marked competitive disadvantage compared to the business climate in other states, says Housekeeper. 

Source: Brandon Houskeeper, "How Government Officials Increase Home Prices," Washington Policy Center, Policy Brief, January 2010. 

 

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