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Do we need a new Tsunami of home construction in Arizona?
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Do we really need to see this sight all over town this year?
Arizona home builders are under the strange impression that a three year suspension of them having to pay impact fees to cities for new utility and road construction will thus allow them to start a new flood of home construction in the valley. The Arizona Legislature has approved this moratorium for the next fiscal year, but Governor Brewer hasn’t signed it into law.
Spencer Kamps, a vice president with the Home Builders Association of Central Arizona, spouts nonsense when he says that this moratorium will lower the costs of building and buying new homes. I guess he thinks that costs can disappear by government fiat. In reality, needed improvements must be built and paid for by someone. In this case, municipalities estimate how much infrastructure a development will cost them, and they charge the developer a per house fee, who of course passes it on to the new homeowner. Otherwise, existing taxpayers of the city are then forced to pay for improvements for which they receive no benefit.
Mr. Kamps also says it will jumpstart construction on 50,000 empty lots across Maricopa County that already have some infrastructure built near them. This is incredible. A quick search of MLS listings in Phoenix show that over 20,000 properties, priced at or below $250,000, are for sale in that city alone, including several thousand foreclosures at or below $50,000. Nationwide, there is nearly a 12 month supply of homes on the market, about twice the amount that is considered healthy for the housing market. Why would any reasonable business want to introduce more supply into an oversaturated market?
To save the most money, costs need to be paid for when incurred, so if these fees aren’t collected for three years, many complications could ensue. Cities may delay infrastructure improvements, or sink deeper into debt to build them now. Ultimately, the final costs will be more, and paid for by more people, than if the fees are collected first.
Mr. Kamps, if you want the home buyer to pay less, than just let the free market work by itself. Already, local home prices have fallen to half of what they were a year ago. Once several months of oversupply are sold off, then you can start building new and wanted homes, and your profit margins will improve.
Links: AZcentralOne, Two
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