May 18, 2009
Local Governments Thinking “Outside the Box”
18 May 2009
Posted by VAR
With the down turn in the economy and housing market, some localities are looking at alternative measures to help spur activity in the marketplace. The newspaper in Fredericksburg, Virginia, The Free Lance Star, reports that Spotsylvania County has begun discussions of 9 new initiatives to help rejuvenate the local economy.
The proposed initiatives are:
- Designate Business Development Manager Jennifer Mihalcoe and Assistant Planning Department Director Leon Hughes as points of contact for all permit questions from residents and builders.
- Offer some “over-the-counter” permits online ,such as chimney relining, irrigation systems and converting electric to gas.
- Accelerate plan review and permitting process.
- Cut by 50 percent fees on all commercial permits and site plans. This would require a public hearing.
- Cut by 50 percent permits fees for single-family homes, decks, pools, finished basements, sheds and garages. This would require a public hearing.
- Allow insurance bonding for public projects in addition to letters of credit and surety bonds. Insurance bonding is more cost effective for the business or contractor than providing a large lump sum as credit.
- Allow one or two days before the county draws funds for letters of credit. Current rules require funds to be drawn immediately.
- Reduce cost on single-family lot improvements by as much as $2,000 by allowing engineered erosion and sediment-control site plans to be by written agreement in lieu of actual plans.
- Waive requirement for a responsible land disturber study.
I see several glaring problems with these “incentives.” However, I will deal with the fact that these incentives don’t do enough to lower the cost of new construction to facilitate enticing buyers into that market. The average house price in Spotsylvania County in April 2009 was $196,048. The most popular price range for Spotsylvania County in April 2009 was $140,000-$159,999. In April the average sales price for a new construction home was $281,286. The fact is, building is expensive. Buyers are looking for the best possible deal. Today’s buyer also wants a home they can move into in 30-45 days. Not many buyers have the time to wait for new construction to be built or the finances to pay an existing mortgage or rent payment and carry a construction loan note. Builders are definitely not sticking their necks out there to build a bunch of spec homes, either.
I applaud Spotsylvania County and other localities for thinking outside of the box, but I think they need to dig a little deeper. Focusing on the housing industry at this point may not have the immediate return the county is hoping for.