By Jeff Stuve, president
National Association of Industrial and Office Properties
Albuquerque City Councilors Eric Griego and Martin Heinrich have lauded their own handiwork in adopting the Planned Growth Strategy (PGS) and the levy of impact fees. These new laws seek to advance a particular agenda: to penalize the growth of suburban style homes and to reward the densification of existing neighborhoods.
If successful, these elected representatives will have put the "American Dream" of home ownership out of the reach of a significant segment of the public. Young families, seniors on fixed incomes, and many single-parent families just got bounced out of the world of eligible homebuyers in Albuquerque.
The imposition of impact fees in the city adds about $10,000 to the cost of a new home on the West Side and parts of the North Albuquerque area. For many potential homebuyers this is the difference between being able to qualify or not qualify for a mortgage.
Buying a home in the Northeast Heights, on the other hand, where land and homes are already more expensive than West Side housing, won't be taxed by impact fees. Some councilors, through the PGS, hope to encourage young families, seniors, and single parent families to live on small lots or in apartments or townhouses where roads, libraries and community centers already exist.
The politics of these new laws have been very interesting. Certain councilors have cast "developers" as the cause of several societal ills, including the advancing, oozing notion of "sprawl." The PGS purports to solve "sprawl" by using impact fees to tax developers. Unfortunately, they missed their mark.
Competition within the development and construction industry does the same thing it does in other market sectors; build a better home for less, and buyers flock to your door. Taxes, such as impact fees, get tacked onto the price of the product, in this case, homes. Just as JC Penney adds sales tax to each pair of trousers it sells, homebuilders add impact fee taxes to every home they sell.
The difference is this: JC Penney at Coronado in Uptown and the JC Penney at Cottonwood on the West Side add the exact same sales tax to the trousers you buy. With house sales, the council has said that a West Side homebuyer must pay a $10,000 tax for her home, while an East Side homebuyer pays nothing or a minimum of $1,500.
In creating this differential tax, the council hopes to have people "vote with their feet"— to make an economic decision to live on the East Side rather than the West Side. The council, unfortunately, has miscalculated. In fact, homebuyers have more options than two: they can buy a home in Rio Rancho, Los Lunas or unincorporated Bernalillo County. The homebuyer will find that homes in those places are not taxed to the same extent as West Side Albuquerque homes.
As a consequence, the council's new differential tax is a penalty to West Side homebuyers, but ironically favors "sprawl" of homes to outlying communities. Home construction companies today have stopped buying new lands in Albuquerque, taking their money and builders to outlying communities. When home buying moves elsewhere, so do the jobs and services like grocery stores and office buildings. The council's excessive tax on West Side homebuilding, then, not only sends houses to Rio Rancho, it also sends the Smiths and GameStops there too.
Impact fees are intended to be applied evenly to all development to pay for the impacts of that development on roads, drainage and parks. They were not intended to favor growth in one area and penalize it in another. New houses in the Northeast Heights have "impacts." Get enough of them, and a new traffic light or drainage service will need to be built. Build a new Home Depot or Costco on South Eubank and you need another lane of traffic. These items should be bought with impact fees.
Some councilors are unwilling to create a fair tax system because of their interest in social engineering. The Legislature should consider changes to the state's impact fee law to prevent the inequitable system that now exists in Albuquerque.
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