• Commentary

Foundation Study Examines Georgia’s Development Impact Fees

These days, more and more of our work at the Georgia Public Policy Foundation involves monitoring and reporting on the precarious state of housing in Georgia. You don’t have to look far to find rising costs, questionable regulations and building restrictions that make affordable housing – especially when accounting for good schools and employment opportunities – difficult to find for many Georgians.

The Foundation just released a study of one contributor to housing costs that has a varying but often significant effect throughout the state: development impact fees.

Impact fees are designed to account for smart community growth. In Georgia, this means raising funds from new developments for water treatment and distribution; wastewater treatment and disposal facilities; roads, streets and bridges; stormwater control; parks, open space and recreation areas; public safety facilities including police, fire, emergency medical and rescue facilities; and libraries.

Georgia contains 54 city and county governments that are authorized to levy impact fees. The residential properties upon which the fees are assessed include single-family homes, multifamily apartments and multifamily condos and townhouses.

In theory, impact fees are a way to raise capital for infrastructure without taxing all citizens. However, there is growing concern that, rather than benefiting communities by funding needed infrastructure, impact fees are harming communities by pushing housing prices out of reach for some families. Earlier this year, the Foundation found that all fees during the building and development stages, including but not limited to development impact fees, account on average for 5.6% of the cost of a new single-family home in Georgia. 

Another issue with governments’ handling of impact fees is transparency. According to state law, local governments must prepare “an annual report describing the amount of any development impact fees collected, encumbered, and used during the preceding year by category of public facility and service area.” This, however, was not common practice among the local governments analyzed. The Foundation had to use phone calls, emails and public records requests to obtain information about 40% of total annual revenues derived from impact fees.

By gathering and publishing all of the impact fee data in one place, we hope to increase transparency, inform the discussion on how impact fees are collected and spent, and become a resource for property developers, concerned citizens and government officials. 

There is plenty of variation among the burdens imposed by impact fees. For example, the city of Hampton in Henry County had the lowest fee among those jurisdictions charging one: $229.15 per new residence. But the city of Milton in Fulton County achieved a clean sweep with the most expensive rates among all cities and counties for all three types of residential properties, charging $7,757.85 for each. Other metro Atlanta cities such as Alpharetta, Peachtree City, Roswell and Sandy Springs were also found among the more expensive entries on these lists.

But impact fees are not only a burden in the Atlanta area. Take the communities near the expanding port of Savannah as an example of where one would need to weigh impact fees against other economic and regulatory influences on housing costs. Although neither Savannah nor Chatham County collects impact fees, some surrounding counties do. A homebuyer looking for a cheaper option than Savannah proper should know how Effingham County to the north and Bryan County to the south use impact fees. On paper, Effingham County charges the highest impact fees among county governments in the state, but it has not actually collected the fees from builders and developers for years. Bryan County charges on the high end for counties as well and, as the Foundation recently reported, it has a history of using fees to influence growth in questionable ways.

Some local governments are authorized to use impact fees, but presently do not, such as Cartersville and Gilmer County.

While most impact fees are categorized under single-family, multifamily apartment, or multifamily apartment and condo, certain jurisdictions charge adjusted rates. The city of Atlanta charges different rates for high-rise, mid-rise and low-rise housing. Bryan County does this as well, but only for multifamily housing. Roswell charges based on square feet for both single-family and multifamily housing. 

This study provides an up-to-date landscape of impact fees, but that landscape could change soon. Gilmer County is considering levying impact fees for the first time, and Atlanta has scheduled future increases. As Georgia continues to grow amid an unpredictable housing market, it is important for its citizens to have as much information as possible about the costs of living.

This is only the first part of the Foundation’s study on impact fees. Next, we will look at cost burdens compared to consumer incomes, and further examine the trend of increasing impact fees, good and bad examples of transparency, how fee revenue is spent and whether they actually encourage smart growth as intended.