Proposed development fee increases could mean higher costs for buyers


AUSTIN (KXAN) — As the Austin City Council finalizes the city’s budget for the 2019 fiscal year, some builders have their eyes on the proposed changes to the city’s Development Services Department. 

Many of the fees the department charges to build in the city will be increasing under the new budget.

A department spokesperson explained that the fees hadn’t been updated in years and the changes are the result of a 2017 consulting study. It found that in order to adequately charge for the services the department was providing and the volume they were receiving, they would need to increase fees. 

Starting in the 2019 fiscal year, 90 percent of Development Services will also be funded by fees as opposed to by the city’s general fund. The department spokesperson explained that change is to make sure development is self-contained and not drawing from taxpayer dollars.

The Home Builders Association of the Greater Austin Area has been asking council to help cushion the blow of these new fees by taking three million dollars from fee hikes last year to help builders adjust. HBA explained that it will be up to council to direct Development Services to do so. 

HBA members like Scott Turner, an urban infill builder with Riverside Homes, says the new fees will make it more challenging to build homes in the heart of Austin. He explained that under the new budget, some necessary fees to build subdivisions (whether a property is divided into 2 homes or 200 homes) will come out to around $15,000 dollars, which is more than ten thousand dollars more than what they were previously. 

“[The fees] are a barrier for folks like me, builders who build in the middle of town in existing locations where land is scarce and also in small tracts,” Turner explained. 

Turner gets why these fees are necessary and believes they reflect the costs of all the work DSD has to do digging through code to approve a permit. 

“To see the fees go up to such a high level over such a short period of time to reflect the actual cost that DSD has to process that application, shows in real dollars the barriers that the city has to creating affordable housing of any sort,” Turner said. He added that CodeNEXT (the recent attempt to overhaul of the city’s land use code) had potential to make subdivisions and small housing additions cheaper to build, but the process to make those changes was stopped this summer. 

Turner explained that the permitting process has gotten slower over the years in Austin, with an average project taking one to two years to get approved. He is hoping these changes to Development Services will make the process more efficient.

For building designer Felicia Foster, her biggest concern is the fee increase for those looking to build affordable dwelling units (ADUs). ADUs are commonly referred to as “granny flats” and refer to smaller dwellings developed separately from a home on an already existing property. 

“The small projects, they can’t absorb those fee increases year after year,” Foster said. 

She has been adding up all the fees prospective ADU builders would incur under the new budget and found that the entire set of fees would come up to more than $7,000. Foster explained that number has increased 390 percent in the past three years. 

“When it comes to these kinds of fee increases, those are directly passed on to the client through sales prices,” Foster explained. “So even if you’re not building, even if you’re not remodeling your house, you are still affected by those fee increases because it’s that effect of that cost of construction, via sale price, via values increasing.”

The council could agree on a new budget Tuesday, but discussions and amendments could also continue for several days into the week. 

Once the budget is passed, the new fees will go into effect October 1. 

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