City of Dayton fails in effort to impose new fees on new housing

I often make the point that it is, to a large extent, the taxes, fees, and regulations which state and local government in Minnesota impose on housing that makes so much housing here unaffordable. In short, they make it illegal to build affordable housing.

People often reply that they want specifics, that it is easy to complain about ‘regulations’, but which regulations, specifically, do I have in mind? I have, in fact, given examples. But a recent ruling from the the Hennepin County District Court provides another concrete example.

The city of Dayton passed an ordinance requiring homebuilders to help pay an “off-site” transportation fee as a condition of approval for new housing developments. Whereras builders routinely pay for roads and other infrastructure within the development itself, this ordinance sought to charge residential developers for general citywide transportation improvements, theoretically to absorb additional traffic generated by the new homes.

Homebuilders challenged this, pointing out that Minnesota state law blocks cities from collecting “off-site traffic impact fees”. As Finance & Commerce reports,

In court documents, the city argued that its ordinance was legal because it included a “voluntary” option for developers to comply.

Specifically, the ordinance required builders to pay a “project-specific” fee or a “voluntary general transportation fee” related to the proposed development’s impact on the city’s “off-site transportation network.”

In her ruling, however, Judge Robiner wrote there’s “no evidence that these payments are optional or voluntary when a developer must choose one of the two options, both of which require some type of payment before obtaining approval.”

It is true that new housing will increase the burden on local infrastructure and demand repairs and extensions. It is not unreasonable that some portion of the cost of that is borne by the new house owners. In that sense, this is actually one of the less objectionable fees that a locality could impose.

The trouble is that it comes on top of so many others which are not necessary. One of the consequences of a regulatory and fiscal approach that imposes such a high burden in terms of taxes, fees, and regulations, is that it increases the scope for the bad to ‘crowd out’ the good.

John Phelan is an economist at the Center of the American Experiment.