High Permit Fees in the Cross Hairs

For years now, new and higher impact fees have been the nemesis of home building associations in most places across the country. Bearing the costs for new and bigger roads, sewers, schools, bridges, libraries, parks and other infrastructures, builder-paid impact fees have skyrocketed in recent years. But flying below the radar has been a steady escalation of building permit fees, which in a few places have gone way out of whack with the actual costs of providing inspections and administering the process.

The problem for communities that raise permit fees is twofold, says NAHB legal counsel Christopher Senior. First, most states have laws requiring that building permit programs charge fees directly proportional to the costs of hiring inspectors and administering the programs. Second, fees that far exceed those costs can be construed as an unlawful tax, raised without the required authority to do so by state or federal lawmakers. And, Senior says, the temptation for local government to raise those fees has only grown in recent years.

“This is becoming a problem because you have local governments that are not willing to raise taxes or are afraid to raise taxes or are unable to raise taxes that are turning around and finding another avenue for revenue, and it is not a legitimate method,” Senior says. “A lot of times builder organizations won’t sue as long as they are getting reasonable service, but when you get municipalities like DeKalb County [Ga.] that go wild, legal action is the result. The same thing is happening now in Washtenaw County [Mich.], and the fees were two or three times the actual cost.”

In Washtenaw County, home to the city of Ann Arbor, builders filed suit in January against one of the county’s townships after determining that its building permit fees just for the year 1995 exceeded the cost of providing inspections and permits by 80%.

Jeff Fischer, public affairs director for the HBA of Washtenaw County, says the 90 or so builders that built more than 200 homes in that township during 1995 are due about $3.5 million in overcharged fees. Fischer says this case is going to pretrial arbitration and it will be six to nine months before any judgment is rendered. But the builders are heartened by a similar case filed against DeKalb County by the Greater Atlanta HBA.

This month, a federal judge in Atlanta is expected to rule that DeKalb County, which includes portions of Atlanta and its eastern suburbs, must pay home builders, commercial developers and homeowners up to $30 million for systematically overcharging for building permits from 1997 to 2000 in violation of state law.

During that time the county charged $3 per $1,000 of home value, meaning permit fees for a $200,000 home were $600. DeKalb County has charged even more the past two years: $5 per $1,000 of home value, or $1,000 for the same $200,000 home.

To most Atlanta-area builders, the money for permits did not become a problem until delays for inspections, from electrical to plumbing, became longer, sometimes idling job sites for days, says Blake Brewster of Brewster Homes in Atlanta.

“The thing that we were all getting upset with was the performance,” he says. “Anyone would have been willing to pay the money to get the extra service. They were supposed to take the money and hire more people and make the service more effective, and that is not necessarily what occurred.”