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Atlanta considers doubling impact fees on new homes, commercial buildings

By David Pendered

Atlanta city officials are considering a proposal to more than double the rate of impact fees assessed on new homes and commercial buildings.

impact fee, updated summary

Atlanta would more than double the rate of impact fees assessed on most new homes and commercial structures under a proposal pending before the Atlanta City Council. Credit: Atlanta

Developers served on a review panel that endorsed the proposed higher fees. This would be the first increase in rates since Atlanta enacted impact fees in 1993.

Atlanta City Councilmember Matt Westmoreland, who chairs the council’s Community Development/Human Services Committee, said Wednesday the proposal seeks to balance a number of concerns. The committee has scheduled a virtual work session for Thursday at 10 a.m.

Concerns cited by Westmoreland include a potentially chilling effect on future affordable housing. The council in January authorized the borrowing of up to $100 million to help fund affordable units. Westmoreland observed:

  • “There is a recommendation around exemptions for housing affordability. So that definitely is on our minds. One of the things I look forward to talking about tomorrow is that the recommendation is as comprehensive as it can be, and as all encompassing as it can be, to not slow at all any of the great work by our affordable housing builders.”
commercial construction

Commercial projects in Atlanta are eligible for exemptions of the higher impact fees being considered if the business creates a certain number of middle-wage jobs. Credit: Kelly Jordan

The proposal provides exemptions for affordable dwelling units and non-profit homeless shelters, and for businesses that create middle-wage jobs – defined as $38,000 to $80,000 in average annual salary.

Impact fees are cut in half for projects located within 1,000 walking feet of a MARTA station, according to the proposal.

If Atlanta wants to use any proceeds to expand facilities for public transit, the city should seek explicit authorization from the state before doing so, according to Duncan & Assoc., the consulting firm based in Austin, Tx. that produced the Impact Fee Study on behalf of the city.

In Georgia, local governments typically assess impact fees to pay for the impact a development has on the public amenities in the area where it’s built. The idea is that the new developments should help bear the cost of expanding public facilities to meet a growing base of business and residents. Atlanta’s fees are used to improve public roads, parks, and facilities for fire and police.

The proposed fee increases are intended to bring Atlanta’s fees in line with neighboring and peer cities.

Duncan’s report addressed the eye-popping nature of the proposed fee hikes:

impact fees, comparison

Even if Atlanta doubles rates for impact fees, three cities in North Fulton County would have higher rates than Atlanta. Credit: Atlanta

  • “Total updated fees are more than double current fees for most land use categories. This is not a surprising outcome given construction costs have more than doubled and land prices have increased far more in the 27 years since they were adopted….”

Another caveat is the proportion of the impact fee in relation to the sales price of a dwelling unit, according to Duncan’s report:

  • “In addition to the percentage change, it is also useful to look at the absolute amount of the fee change, especially when starting from a low base amount. For example, the maximum increase for a single- family unit would be about $3,400, or slightly more than 1% of the average sales price in Atlanta ($322,000 in March 2020 according to redfin.com). Similarly, the increase for retail would less than $4 per sq. ft. for a 100,000 sq. ft. shopping center, or about 1% of the average cost per sq. ft. for a regional mall in Atlanta (range of $377-$422 in 2019 from ccorpusa.com).”

The city has tried twice to raise impact fees since they were first imposed in 1993. Rate-hike efforts in 2010 and 2017 did not result in any changes, according to Duncan’s report.

 

impact fees, current 1993

Atlanta has not changed the rate of impact fees assessed on homes and commercial structures since 1993. Credit: Atlanta

David Pendered

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow.

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1 Comment

  1. Steve Hagen February 12, 2021 9:45 am

    Great story. All cities in our fast growing region should adopt Iimpact fees!Report

    Reply

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