The Impact of Municipal Governments on Residential Housing: A Case Study of Single Family Detached Housing, in Cary North Carolina.

Providing affordable housing is a major problem in the United States (Koebel, 1993). The literature supports that municipal fees and municipal regulations have a negative impact on affordable housing (Altshuler and Gomez-Ibanez, 1993). This research investigates municipal fees and regulations, which effect housing costs: administration fee, impact fees, zoning interpretations, building codes and other costs. The research further investigates capital improvements made by the development community, which are deeded to the municipality. This research is designed to determine the direction of further investigation into municipal fee(s), which can withstand scientific scrutiny.

Construction Management Curriculums focus primarily on commercial construction and the hard cost of on-site construction. A significant majority of the academic community (87.3%) recognizes that the pre-construction and offsite process and costs are important for construction management students to learn (Kennedy, 1993). The content of this research project provides new information involving the effect municipal governments have on construction costs and therefore is relevant to construction management programs.

This researcher acknowledges the large range in economic values associated with the cost of housing. There is a wide variation between regions within the United States when you analyze land prices, construction costs, and municipal fees and regulations. The variation in land and construction costs is largely due to geographic locations and conditions which affect the supply of land, sources of materials, labor supply, and climates, which effect the construction design (Black, 1990). These variations support the limitation and stratification of this research project. The literature supports the use of case studies since they tend to allow a more accurate analysis of complex characteristics of a population. The housing industry is a complex subject. The use of a case study is further strengthened by the fact that municipal authority is empowered by the state and the variability in the statutes influence municipal impact on housing (Yin, 1989, Bergman, 1974a, Seidel, 1978). Literature does support that the proportionality of land to house cost is relevantly consistent across the country (NAHB, 1995; Snyder and Stegman, 1986). This research will not be comparing economic totals of municipal fees because of the external variables (housing prices and land costs), but will measure the ratio effect of municipal fees and capital contributions to housing and the effect on growth rates. The results of this research is not expected to be used to predict future relationships, but should provide insight to the cost of municipal government to housing costs. It should identify the problems of measuring municipal controls that effect housing. It will identify the area that appears to be the most reliable to investigate and appears to have a significant impact (Skidmore, 1998, Brueckner, 1990).

This research is restricted to a single subdivision in Cary, North Carolina. The selection of Cary, North Carolina satisfies an enquiry by the local development community (consisting of landowners, developers, builders, and subcontractors dealing within the residential industry). The development community and professional organizations in North Carolina have concerns over the rising costs of municipal fees and increased regulation in Wake and Durham-Orange Counties. Wake County, which includes Raleigh and the surrounding cities, has experienced a 42.6% (4.74% annually) increase in population from 1990 to 1998 (US Census, 2000). The characteristics of the town of Cary, which is adjacent to Raleigh, is considered representative of other like high growth municipalities on the peripheral of high growth metropolitan areas within the United States.

Delaney, C. J. (1987) states that impact fees, exactions, and development fees are interchangeable terms. Delaney defines impact fees as "required expenditures imposed on private development in order to obtain regulatory approval to start development. Most legislation dictates that the assessment must be used in support of infrastructure and other social services that are a result of the proposed new development". The method of paying these fees can be in the form of financial payment to the local government coffers, or in-kind exactions. In-kind exactions may be quite varied, but the developer is required to give some value to the municipality in the form of land donation or capital improvement to the municipality’s infrastructure. The value of the donation or work is considered as payment of the impact fee, in-lieu-of the financial payment (taxes). Rarely is a dedication published, but is negotiated with municipal staff. There is empirical evidence that impact fees increase the cost of housing and impact affordable housing (Snyder and Stegman 1986).

Since the cost of housing is a major concern to our society, this research will provide an investigation of local municipalities’ decision to impose impact fees, which is a common practice to limit growth. This research will reveal that municipal officials recognize the inequalities and inefficiencies of using impact fees, yet they continue to use them, since impact fees have the least political resistance (Altshuler and Gomez-Ibanez, 1993). Bergman’s (1974a), research of how industry and municipalities (users of research) use scientific findings quotes "that 50% of users of the research intentionally ignore valid information if it does not fit the prevailing political climate".

Prior studies acknowledge that impact fees affect low income and affordable housing in a negative manner. Research suggests that municipalities could eliminate one of the negative effects by simply exempting low-income housing projects from having to pay impact fees. The question is whether it is politically acceptable for them to do so. The scientific community identifies the social groups; the next generation and the elderly as being affected the most by impact fees. The next generation is often referred to as "first- and second-time" homebuyers (Blaesser et al, 1990). The next generation is affected by the increase in housing cost, which limits the ability to qualify for housing. The elderly, when desiring to sell their property, may be economically forced to delay the sale as a result of impact fees and increased housing costs (Altshuler and Gomez-Ibanez, 1993).

The literature reports that impact fees impact growth and the cost of housing (Altshuler and Gomez-Ibanez, 1993). Skidmore (1998) reports that impact fees retard housing starts by 27%. Brueckner (1990) reports that impact fees are a regressive form of financing municipal growth and should only be used in a limited and restricted manner. Brueckner supports property taxes and user fees as primary sources for municipal funding. McKay, Milliman and Shoemyen (1986) reports when a population increases by 3% per year, as it did in Florida in the 1980s, the region is classified as fast-growth.

Excessive zoning interpretation is the second area of focus on local municipal actions that effect housing costs. This involves municipal staff’s decisions during the approval process. A major issue that can affect housing costs is the interpretation of the existing zoning and municipal regulations on a given subdivision. Municipal administrators’ interpretations of the zoning regulations (ordinances) when evaluating a proposed development often result in the economic loss of property, reducing the number of buildable lots allowed by regulations. This can result in a substantial loss of revenue to a developer and directly affects the cost that must be passed on to the approved number of housing units in the subdivision. It may also cause the developer to select another piece of property on the periphery of the city (Snyder and Stegman, 1986). The results will be revealed in the following Data and Results section.

The third area of investigation will be, administrative fees. Most municipalities publish their administrative fees and therefore they become easily identifiable by the development community. The development community accepts most administrative fees as being reasonable to regulate land development and house construction. These administrative fees cover the actual cost for municipalities to administer and regulate new construction within the municipality’s jurisdiction. They include a) plan review of subdivision tract maps, grading plans, house drawings, and capital improvement drawings; b) building permits for construction of the development phases and house construction phases; and c) inspections of land development construction (infrastructure) and house construction (Seidel, 1978). The purpose of these administrative fees is to assure that the housing project meets all governmental regulations prior to starting work and to assure compliance during construction. In general, those in the development community consider these acceptable and reasonable if applied properly. An administrative fee is perceived as a minimal cost assessed by municipalities and fees most often included in the A/E permit process (Seidel, 1978).

Excessive building codes and other excessive costs is the fourth focus of this research. The municipal issues under investigation will be costs imposed on the development community, as a result of municipal ordinances and practices by municipal staff. The development community defines the term excessive building codes as those that require certain construction materials and techniques to be employed, as a result of municipal regulation that exceeds those of national regulations (Seidel, 1978). The increases in construction and development costs not only include labor and material, but also include the interpretation of building inspectors and the number of inspections required to properly regulate the quality of construction. The development community defines the term other excessive costs to include: Excessive plan review time to process applications, increased engineering cost due to multiple submittals, performance bonds, time delays for approval, and financial impacts dealing with the cost of money during the development process as well as financing the cost of capital improvements (Seidel, 1978, Bergman, 1974a). The results of the case study will be revealed in the Data and Results section. Muth and Wetzler (1968) report that building codes have a positive, but relatively low, impact on housing cost and by the findings of FHA, the requirements within the national code(s) is less restrictive than local codes.

The preceding issues under investigation often are a result of municipal policies, which are politically driven or economically driven. The literature identifies three primary reasons why communities implement slow-growth and/or no-growth policies: 1) to provide, improve, or maintain the municipality’s "infrastructure," such as utilities and roads, both on and off developer’s properties; 2) to provide or maintain "social services" for the community such as schools, fire, police, and health care; 3) to improve the "quality-of-life," which is exclusionary and involves such items as open space, parks and recreation, and limiting congestion (Delaney, C. J., 1987).

The most common methods for cities to accomplish slow-growth/no-growth is through the implementation of: 1) impact fees to cover infrastructure and social service costs; 2) limiting the number of permits; 3) slowing the approval process of plans and permits; or 4) implementing exclusionary zoning. (Kelly, 1993):

The research will also investigate the cost of construction for capital improvements performed by the development community, which when completed increase municipal infrastructure or assets. This research will segregate these items as off-site capital improvements and on-site capital improvements.

Clark and Evens, (1999), define off-site capital improvements as those costs, which the municipality requires the developer to spend on existing municipal infrastructure. The development community may be required to extend or widen roads, or extend municipal sewer, water, storm, and electrical to the proposed new development. The work and improvement is made to other’s property (municipal property) and is outside of the subdivision’s boundaries. The cost is born by the development community, which passes it through to the homebuyer. The development community feels this is an expense, which the municipal government should perform or at least reimburse the developer’s cost (Snyder and Stegman, 1986).

Clark and Evens, (1999), define on-site capital improvements as the costs of roads, sidewalks, and utility construction within the subdivision’s property. The improvement to the community is performed to municipal regulation and supervision, and upon completion, is deeded to the municipality. The practice of on-site capital improvements being imposed on developers began in the 1920s, and most of the development community feels this practice is an acceptable cost of doing business (Altshuler and Gomez-Ibanez, 1993). The results of this case study will be discussed in more detail in section, Data and Results section.

The primary purpose of this research can be simply stated as follows: To investigate the effect of a high growth municipal government’s actions on housing costs. To investigate which fees and administrative actions affect the cost of housing the most? To investigate optimal methods to best measure municipal fees’ effect on housing costs.

The literature is exhaustive on the primary issues of housing and impact fees and can be briefly summarized as follows: Impact fees do increase housing costs (Nelson, 1988). An impact fee is a form of regressionary of taxation (Blaesser, 1990). Impact fees have a greater influence over first and second-generation homebuyers than higher priced housing (Altshuler and Gomez-Ibanez, 1993). The development growth rate may be measured by the rate of building permits (Skidmore, 1998). Municipality’s which formally impose policies of no-growth or slow-growth negatively influence the number of housing starts (Altshuler and Gomez-Ibanez, 1993). Confounding variables of sales price, sales velocity, square footage, features, amenities, lot sizes, community preference can be statistically nullified through an elaborate multiple regression model, such as the Hedonic Model used by numerous other studies (Skidmore, 1998, Delaney, 1987). Zoning regulations become a form of exclusionary discrimination imposed by municipal governments (Bergman, 1974).

The problem stated is that, municipal fees and municipal approval of housing development effect affordable housing. Altshuler and Gomez (1993) report that municipal leaders’ use of impact fees and zoning interpretations raises the cost of housing; impact fees reduce the number of housing starts per year; zoning reduces the number of buildable lots, which increases the cost of housing; the use of impact fees is a form of regressionary taxation; impact fees and zoning interpretations increase the cost of housing to a point where first and second-generation homebuyers may no longer afford housing in their preferred municipality; the homebuyer must then seek housing on the peripheral of the core municipality, which may be of lower value and fewer services, which contributes to the concept of urban sprawl; municipal leaders may impose formal policies to slow-growth or no-growth, which perhaps is a political philosophy to maintain a perceived quality of life; when the housing market moves outward, the municipalities may receive some relief on portions of their infrastructure (sewer and water), that may negatively increase the impact on traffic and social services without the benefit of personal property tax income (Nelson, 1988).

This research concludes that impact fees have a greater impact on housing costs than zoning interpretations by municipal staff, administrative fees, excessive building codes and other municipal forced costs. The research does suggest that as the impact fee ratio increases (impacts fees as a ratio of housing cost), the number of housing starts decline.

The next section details the focus of this research which is to analyze the effects of impact fees, zoning interpretations, administrative fees, administrative approval process, excessive building codes and other costs for single-family detached (SFD) housing. The study will measure the cost of one subdivision in Cary, North Carolina from 1997 to 1999. A national homebuilder and municipal records provide the data for this research. The study reveals that there may be a relationship between housing starts and the amount of impact fees.

This research is a case study performed on a single municipality, which the development community has classified as a slow-growth/controlled-growth municipality. The municipality has selected impact fees as its source of revenue to pay for infrastructure and to limit growth. The municipality has chosen to slow the development approval process and by adopting administration policies for housing projects which negatively affect zoning, building codes, i.e. A.D.A, and other excessive costs.

The data was obtained by a personal interview with a large builder/developer’s (300 units per year in the Raleigh/Durham area). This researcher interviewed the Area President and his Subdivision Manager. The data source was provided by the subdivision drawings, municipal published fees, internal company accounting records, and professional opinions of comparing one municipality’s operations to another, in determining excessive costs and interpretations of regulations by municipalities.

The research results will be discussed in detail in the following, data section. The research should provide insight into the following: 1) Provide insight on which local municipal fees affect residential housing and need to be investigated. Four categories of municipal costs were investigated and two areas of capital improvements were measured. 2) The study allowed the researcher to identify which categories appeared to have the greatest effect on housing. 3) The study identified which municipal costs lent themselves to optimal retrieval of information and validation of the data. 4) The study resulted in establishing the focus of future research.

This research discovered the development community’s schedules, record keeping, and interpretations to be so varied that the difficulty to replicate and validate the data of the excluded components would be an unrealistic task. The study revealed that the investigation of impact fees to be the most significant factor and proved to be the most replicable and valid component for future research.

A case study was performed on a municipality (Town of Cary, NC), the development community had, classified as a slow-growth municipality that had selected impact fees as its primary source of revenue to pay for infrastructure, exclusionary zoning, restrictive zoning interpretations, extended approval process, and excessive building codes as municipal policy to limit growth. Appendixes provide the results of the study including: Summary of Total Municipal Fees (1), Builder/Developer Profile (2), Subdivision Profile (3), Summary of Municipal Published Fees (Administration Fees are taken from here and illustrated in appendix 1, Summary) (4), Zoning Interpretations, (5), Impact Fees (6), Excessive Building Codes (7), Other Detail sheets (8), Graph of Impact Fees-Population- Number of Permits (9) (Appendixes available upon request).

The data for this research was obtained by personal interview with one of the large regional builder/development firms ("participant") working in the Raleigh-Durham region of North Carolina. The firm builds approximately 250 to 300 single-family detached homes per year. This would be classified as a large builder (NAHB, 1994). The representatives of the participant builder were the Area President (25 years within the housing industry) and his Subdivision Manager (15 years in the land development industry). These two managers provided the information on the participant profile and information on the subdivision profile. The information was retrieved from company accounting and from the subdivision’s approved plans. The amount of Impact Fees and Administration Fees were calculated by using published municipal fees times the appropriate unit as provided by the participant who obtained from information from the drawings or invoices paid the municipality from internal accounting records (i.e., acreage, square foot of average house, the number of housing units, lineal foot of road). The effects of Zoning Interpretations where provided by the managers analysis that the municipalities staff reduced the number of lots submitted by the participant’s land planners and engineering consultants by 10 lots. These inclusion of these lots met zoning regulations and municipal regulations. The participant’s managers showed this researcher, internal company records, which placed a financial value for overhead and profit for land and house development at $35,000 per unit (regional range $25,000-45,000) (Wake County Census, 2000). The data, for excessive building codes and other excessive costs, were provided from internal records. The determination of what was classified as excessive was identified on the basis of the participant’s professional experience in the industry and dealing with other area municipalities that do not require the participant to perform the "excessive" tasks. In summary, the following data is from a combination of 1) public fees applied to a specific subdivisions quantities and average house sizes, 2) internal accounting records, in the form of invoices, financial cost reports, or projected financial projections, and 3) professional opinions and internal estimates of cost of construction. The following provides the results of the information obtained from this case study.

The subdivision was a 118-lot single-family detached subdivision with an average sales price of $214,000, lot price $34,792 and approximately 2,400 sf of heated floor space. The zoning is considered medium density, R10 CU, Residential, 10,000 sf minimum lot size, Conditional Use. The parcel consisted of 60.15 acres and was developed between 1997 and 1999 in three phases with an average lot size of 10,800 sf each (Table 1). The municipal fees affecting residential housing were segregated into four fee categories and two capital improvement categories. The results of the investigation are summarized below and details may be viewed in the following tables.

Administrative Fees: 1. The subdivision approval process cost $735 ($6/unit) and was paid by the engineering consultant and reimbursed by the developer. The detail of the $735, were determined by applying the municipal fees to work performed by the consultant and illustrated in the summary sheet (Appendix 1 and 4). The participant’s managers identified which tasks had to be performed to obtain city approval. 2. Inspection fees for the development process were $59,295 ($503/unit). 3. Building Permits cost $67,402 ($571/unit). Were calculated the same way as the subdivision approval process. In summary, the total cost of administrative fees was $127,432; or $1,080 per house; .51% (half of a percent) of the house cost (sales price).

The Administrative Fees are considered by the development community (the participant’s managers) to be acceptable and insignificant The above fees were not easily obtained, due to the participant’s time restraints, lack of detailed accounting, and consolidation of fees paid by their consultants. As a result of dealing with the participating firm and the experience of obtaining data from 8 other firms at the beginning of this research project, leaves this researcher with the conclusion that the development community does not track these costs very closely since they are acceptable and only consist of approximately a 0.005 percent of sales. In conclusion, these costs should be excluded from further research because: of reliability and validity problems in retrieving and analyzing the data; their apparent minimal impact on housing; and the perception from the development community that they are acceptable (Altshuler and Gomez-Ibanez, 1993).

Impact Fees: 1. This municipality imposed a form of an open space fee that they identified as Acreage Fees, based on the gross acreage of the subdivision. This amounted to $72,180 ($612/unit) at the time of this subdivision. This fee was established from an invoice for a specified number of lots and applied to the whole subdivision. It should be noted that this fee has been deleted and replaced with a Utility Development Fee. 2. The Parks and Recreation Fee is another impact fee to pay for city amenities and cost $136,172 ($1154/unit). This fee was paid (invoice provided to researcher for verification) at plat map recording on a negotiated basis with the participant and the fee is shown as a per unit basis. 3. The Environment Permit is based on $150 per acre costing $9,023 ($76/unit). This fee was increased in 1999 to $165/acre or to $84/unit (see Appendix 1 and 4).4) The Transportation Fee was assessed to handle road and traffic impact and cost $37,170 ($315/unit) in 1997. Since FY 1999, the municipality increased this fee by 3.89 times, which would amount to $151,184 ($1228 per house) if built in 1999. 5). The Utility Development Fee replaced the old "Water and Sewer Infrastructure" fee in FY 1999. This subdivision fell under the prior regulations, which were based on $1600 per acre, and amounted to $96,240 ($816/unit). The new requirements are based on the square footage of house. This size of home, which averages 2400 sf, would cost $359,428 ($3,046/unit). It does eliminate the Acreage Fee, which amounted to a reduction of $72,180; therefore, the net increase is $191,008 ($1619 /unit), which is a 113% increase in city impact fees. 6.) the utility connection fees were $122,720 ($1,040/unit), (see table 3).

In conclusion, the total impact fees for this 1977 subdivision amounted to $473,505 ($4,013/unit) or 1.89% of housing costs (sales price). With the 1999 increases in impact fees, this same subdivision would cost $772,192 ($6612/unit) or 3.1% of costs, which is not an acceptable range for lower priced housing. This is an increase of 64.8% in municipal impact fees. These figures do not consider the off-site capital improvements for this subdivision, which amounted to $200,000 of construction costs with no profit or operating expenses ($1,695/unit). The development community therefore considers the true impact fees for this municipality to be $5,708/unit or 2.7% of cost. If constructed in 1999, the impact fees would be $8,307/unit or 3.9% of costs.

Capital Improvements: 1. Off-site capital improvements amounted to $200,000 ($1,695 per house or .8% of cost) worth of road and utility construction to meet municipal requirements to obtain approval of the subdivision. As discussed earlier, the development community considers these as impact fees. 2. On-site capital improvements amounted to $1,244,714 ($10,548/unit or 4.97% of cost). This is the cost of roads, walkways, and utilities constructed and paid for by the developer, then deeded over to the city as the city’s property. This is the largest single category of cost in this study. This particular builder/developer participant firm contends that this should not be considered a municipal fee, but a cost of doing business (Clarke and Evans, 1999). The literature supports this position since the development community has historically paid for this since the 1920s. In support of the literature, the area manager of this participant firm believes the off-site improvement should be considered as a municipal cost and classified as an impact fee imposed on housing (Clarke and Evans, 1999) (see table 4).

The cost records from participating firms are too varied in the method of recording, interpretation, and differing construction conditions. The participants are also reluctant to reveal confidential data. Since this could not be replicated and validated it is recommended to exclude them from such further research.

Excessive Zoning: Zoning ordinances were not analyzed in this case study. It is reported by the participant firm and confirmed by municipal ordnances, that the Town of Cary does not have any high-density zoning for single-family housing, nor does it have low-income housing. The participant firm states that the municipality would only approve developments with low to medium-density zoning. The zoning issues measured in this case study dealt with interpretations and requirements imposed by the municipal staff, which would lower the number of buildable lots, which current zoning regulations should have allowed. The case study includes municipal zoning regulations, which the participant firm identified as additional costs, which were not market driven, but were solely mandated by municipal zoning regulations. The results of this research imply that zoning issues can be significantly driven by municipal staff mandated decisions or market driven lead to subjective results and therefore supports the exclusion of zoning from further research. In this pilot study, the participant firm concluded the additional costs to be approximately $410,694 ($3,480/unit or 1.64% of costs): 1) the subdivision did have to go through rezoning. It took approximately 12 months to obtain subdivision approval, which is considered by the participant to be 6 months longer than the typical approval process. This was further confirmed with a telephone interview of a senior project engineer of a local large civil engineering land planner. The costs were obtained from the participant’s internal records of projected earnings per lot and house sales. The seller of the land had to bear the carrying cost of this delay since the developer had the purchase based on final approval. The city required two highway accesses to the property that created an additional design and construction costs of $45,000. 2) Due to the city planners’ interpretations of local ordinances and changes, which were made to the submitted (preferred) engineering layout of the subdivision. The changes resulted in the loss of 10 buildable lots, strictly as a result of staff interpretations (interview). The participant firm reported this cost as $350,000 in lost net income due to staff requirements on zoning. 3) The city also requires one 2.5" x 8’ tree per house which amounts to $11,800. 4) They require a high curb, which increases the cost of curb construction, which adds $3,894 in additional curb cut permits which are not required by surrounding municipalities.

The discussion provided this papers Municipal Policies discusses the above costs. The results form this case study reflect the position of the developer’s efforts to maximize the number of units on a parcel of land, in an effort to provide lower priced housing. The case illustrates the municipal staff position to limit density and enhance services that benefit the existing public’s interests. These economic and social issues are widely debated (Altshuler and Gomez-Ibanez, 1993).

In summary, the total impact of zoning interpretations and regulations cost $410,694 ($3,480/unit or 1.64% house cost or 10% of lot price). Although the economic costs are a significant number, this category has been recommended to be excluded from future research due to the difficulty of validation from sources of the data and possible various interpretations by the participants. Due to the nature and competitiveness of the housing industry, the development community is reluctant to disclose cost data, and the process of their data collection is not consistent industry-wide.

Excessive Building Code: This section addresses the views of the municipalities where they impose building codes that exceed the Regional Building Codes (Seidel, 1978). In this city, they are considered minimal with the requirement of using standard 6" curb design whereas other cities allow a rolled or valley curb configuration. This adds an additional $33 permit fee for curb cuts, $425 increase in construction cost per home based on an average lot width of 75’. It is also felt that the city requires at least one engineering letter per house and a processing fee that amounts to $133 per house. Termite treatment adds $150 per house. Excessive housing inspections add another $200 per house. This city requires approximately double the inspection calls to obtain approval from house inspectors. The city charges $33 per re-inspection. The norm is 6 inspections total and in the Town of Cary, it takes an average of 12 inspections to go through the inspection process (see table 6). The results were obtained from the participant’s interview and those of 4 other firms. The participants provided inspection fee records between the subject municipality and 4 other municipalities in the region. Interpretations of building codes are addressed as having increased construction costs by as much as 8%, when they exceed the United Building Code or the other National standards (Seidel, 1977).

Other Excessive Costs: Obtaining approval from the Town of Cary’s regulatory departments takes the developer’s consultants (Engineers/Land Planner) an additional 2 to 3 revisions. What used to be completed in 2 to 3 revisions now totals 4 to 6 submittals to obtain approval of the subdivision. The results were obtained from a telephone interview by the researcher with the participants engineering land planner, who designed and obtained the approval of the subdivision from the municipality. The consultant’s manager contends that the municipal staff in Cary causes an increase in design fees of approximately $300 per house from several of the adjacent municipalities. The core municipality, Raleigh, is the best to deal with and least costly from the subdivision approval process in both costs and processing time. The research did not complete the analysis of financing cost of all the municipal costs they impose on the development community. The results for reasons already discussed would be non supportive. This could be an item for further research by others. Other Excessive Costs should be excluded from future research. There are too many subjective opinions and inconsistent data to obtain valid information. Consultants would not want to be identified since they deal with these municipal staff on a daily basis and require their cooperation to obtain approval for their clients (Seidel, 1978) (see table 7).

In summary of the last two cost categories, total costs resulted in $146,438 ($1,241/unit) and .58% of the sales price.

In conclusion, the impact on housing costs as a result of total municipal fees and all deeded property to municipalities may attribute $23,097 per housing unit (10.9%) or 66.4% of the lot cost. The total without the on-site capital improvements is $12,549 per housing unit (5%) or 36% of the lot costs. Impact fees without off-site and on-site capital improvements will be the focus of this research when determining the cost of impact fees.

This research investigated an upper-middle class subdivision in which the 1997 impact fees costs $4,013 per house, 1.9% of the sales price, and 11.5% of the developed lot price. This municipality increased impact fees in FY1999, which resulted in current fees of $6,612 per house, 3.1% of the sales price and 19% of the lot price. The literature concludes that impact fees are typically based on the number of units and not on the price of the home (Nelson, 1988). Therefore if the same costs were applied using the 1997 fees to the cost of a 1^st time homebuyer’s price range of $90,000, the cost of fees would account for 4.5% of the sales price. The participant firm reports that the selection of the target market of $214,000 was significantly influenced by the cost of impact fees. The higher-priced home could accommodate a 2% impact fee but a lower priced home could not absorb a 4.5% fee. Therefore the developer stop building affordable housing in Cary and went to a higher priced market. He moved his lower income units further out from the Raleigh metropolitan area.

When analyzing the housing starts versus population versus impact fee rates, the data revealed that the housing starts dropped 27% when the increased fees imposed in FY 1999 were implemented. The results suggest that the increase of impact fees to 3.1% for the $214,000 house market resulted in the development community seeking other municipalities, even for the higher priced market.

The results of this research suggests the focus for future studies be restricted to impact fees and their effect on the development rate in core and peripheral municipalities. The research and literature suggests the greatest impact to be on lower-priced housing (1^st and 2^nd time buyers). The data for impact fees is reliable and valid, being obtained from archival public records. The data for impact fees for the study was retrieved from the participant firm’s documents on the subdivision, and then applied to published rates. The personal interview method requires too much cooperation from the already over worked development community and relies on sketchy accounting records from the participant. The data accumulated from zoning interpretations could not be readily or easily duplicated. The data requires interpretation from the participant, varied accounting methods, and the reluctance of the participant to share confidential records.

Therefore the only reliable and valid category, which lends itself to future scientific scrutiny, would be impact fees. Omitting the other categories of Administration Fees, Excessive Building Codes and Other Excessive Costs, which all appear to be insignificant and acceptable to the development community. Impact fee data is all public record and is archival information (revenue, populations, building permits, and house sales).