Monday, March 20, 2006

The Power of the Developer Lobby

Christina Nuckols with the Virginian-Pilot has a story today describing how the powerful home builder/developer lobby defeated Timothy M. Kaine's proposal to give local governments more power to deny rezoning requests when local roads are inadequate.

Writes Nuckols: "In a January blitz, more than 100 builders and real estate agents trooped into legislators' offices urging the measure's defeat. They argued that the measure would cause housing prices to skyrocket, upend the real estate market and damage the state's economy."

When the builder/real estate lobby talks, politicians listen. The industry gave $10 million last campaign season to political candidates -- including $3.2 million to Tim Kaine.


At 11:56 AM, Blogger Ray Hyde said...

They argued that the measure would cause housing prices to skyrocket, upend the real estate market and damage the state's economy."

And they wee probably right.

At 3:38 PM, Blogger Toomanytaxes said...

Ray Hyde: Given the substantially higher levels of land use regulation and mandatory impact fees in Suburban Maryland versus NoVA, shouldn't housing prices be demonstrably lower (at least by the costs imposed by government)in the Virginia suburbs than in the Maryland suburbs? I'd sure like to see someone produce the metrics on that one, but won't hold my breath.

I suspect that, to the extent that Metro D.C. is a single market for residential real estate and assuming arguendo that all of these regulatory costs are passed through to buyers in the Maryland portion of the market, prices in the Virginia portion are not lower. Rather, I suspect that the higher costs in Maryland permit sellers of new homes in Virginia to reap a windfall - they price at the same level as if they pay the regulatory costs and fees, but don't pay them. But then, I'd like to see the metrics.

At 8:36 AM, Anonymous Anonymous said...

TMT -- you are right, and with those higher profits there is even more money (and motivation) for major political contributions.

At 10:43 AM, Anonymous Ben said...

Yes, Virginia's conditional zoning system is not mandatory. Still, its produced $238.5 million in private investment in public infrastructure since 2000. Three out of four of those dollars were spent in Northern Virginia. Those millions were passed on to new home buyers and can also viewed as using private mortgages to fund public infrastructure.

At 2:51 PM, Blogger Toomanytaxes said...

Ben, just out of curiosity, where did you get your figure? I'm not at all suggesting it's wrong. I'd just like to have more information on this important issue of proffer/impact fees.

While the state does not (as far as I know) publish data on in-kind proffers, it does publish information on cash proffers. Needless to say, Fairfax County's performance is not good -- at least in the view of many of its citizens. For example, in fiscal 2005, Prince William County collected more than four times as much proffer cash as Fairfax County, while Loudoun County collected slightly more than 3.5 times as much. Fairfax County's target proffer for schools is $7500 per student, while Stafford and Loudoun collect substantially more than that. Of course, a Fairfax County-based developer offered Frederick County, MD more than $40 K per student (using FCPS' student yield ratios) based on an offer of more than $20,700 per home.

I would, however, suggest that your implied assumption builders can collect the entire amount of any proffers/impact fees seems overstated. As this blog discussed at some length, a California study indicated that market conditions and not a developer's costs control when, and to what extent, impact fees and other regulatory costs can be recovered from new home purchasers. The study found that, in a slower market and for lower-priced homes, developers ate three-quarters of their impact fee costs.

I'm sure that, in boom times, those costs could be recovered several times over, at least in some markets. However, as the market slows (builders are offering big incentives to avoid market-upsetting prices cuts in some areas of Virginia), the imposition of proffers might well just reduce profit margins.

At 9:06 PM, Anonymous Dean Settle said...

Mr. Hyde is aligned with the Citizens for Profit Rights in Loudoun.
The COCS has been explained in depth to all of the group in hearings, yet they do not care about rural land.
All they see is the potential profit on that rural land, infrastructure costs left with the remaining tapayers be damned.
They feel that they are entitled to a windfall and perfectly entitled to leave the Loudoun taxpayer with the bill.
My rural farm requires .35 from every dollar I pay in. These new homes require $1.75 for every dollar they will pay in. That is the highest in the country, and exceeds the national average by .25 as of 6 months ago.
The abnormally high rate is because of the accelerated growth in Loudoun County and is not approached again on the East Coast.
They cannot discredit this, nor can they address it, so they throw out smoke screens of per seat costs and threaten that the housing costs will go up if we do not build. I'ts hilarious, if it weren't so sad.


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