Beleaguered builders ask cities to hold fees

Struggling homebuilders are looking for a lifeline from local governments, asking for flexibility on rules and fees to help them get back to building.

In a letter sent to cities and counties, the Home Builders Association of Metropolitan Portland sought a helping hand Oct. 31.

Since then, their requests have sparked thoughtful debate among elected leaders in Metro area communities, including Lake Oswego. Several jurisdictions plan meetings with the Home Builders Association in the next two months.

Pointing to the global financial crisis and unprecedented economic hardship among home builders, the Home Builders Association has asked for several reprieves from local governments:

• As home construction freezes, they want governments to extend project approvals and permits until stable financing and consumer demand for housing resumes in 2011 or 2012. Doing so prevents builders from having to reapply for project approval and lose money already spent on engineering, planning and permitting fees. Those costs can sometimes reach $100,000.

• The Home Builders Association also wants governments to exempt projects already approved for construction from increases in related fees. Builders are charged fees called system development charges for the impacts of new homes on community infrastructure like roads and parks. Those fees are set to increase in several communities and could complicate financing on approved developments while banks lend cautiously.

• Governments are also being asked to temporarily reduce, suspend or delay fees on new construction until homes are sold. Delaying payment of system development charges, permits, plus planning and engineering fees could help builders improve their odds of getting funding from banks, according to the Home Builders Association. The agency has suggested delaying payments of up to 18 months.

They say any help jurisdictions can provide will help jumpstart new development as the housing market turns, as well as help builders to complete stalled projects and bolster the economy by providing jobs.

Bad as the '80s

Joe Keizur, interim vice president of government affairs for the Home Builders Association, said builders are essentially calling in favors from governments after being generally cooperative with fee increases while building was lucrative.

'Right now we need some reciprocity,' said Keizur.

A quick look at the industry underscores the problems builders face: The global financial crisis has tightened credit markets and bank lending is in short supply. Buyers and builders alike are less likely to obtain loans and demand for housing is low. Those factors have caused three of the region's top 10 home building companies to file for bankruptcy in recent months.

The effects of those bankruptcies have trickled down, forcing contractors who paint, tile floors, build cabinets, install plumbing and wire new homes out of work.

The Oregon Employment Department noted 11,000 construction jobs were lost in the development sector between September 2007 and September 2008. Many small-scale home builders and contractors aren't counted in those figures, or in the current unemployment rate of 7.3 percent, because they are self-employed.

'It's probably as bad a building environment than it's been since the '80s and given that, we need jurisdictions to help us out,' Keizur said.

Weighing help, detriment to cities

In Lake Oswego, city councilors have discussed possible changes in fees and extensions for construction. No decisions have been made.

System development charges are planned to increase 3.5 percent in the city after a public hearing Dec. 2. Included in the updated fee schedule is a significant increase in the parks system development charge, which is proposed to double to $5,959 per home for multi-family homes and triple to $10,715 per home for single-family homes when the fees take effect in February.

With such a dramatic turn in the economy over the last six weeks, Mayor Judie Hammerstad said the Lake Oswego City Council may opt to postpone some of the increases in system development charges, retool building fees or offer extensions on project permits and approvals.

'You could make the argument there is a benefit to homebuilders. On the other hand, the detriment to the city would also be there so you have to weigh these two things,' she said.

Changes in building fees would reduce the money that Lake Oswego has available to pay the planners and engineers who handle development projects. Changes would also reduce the funds available for public improvements.

With budgets already crimped by slow building, Hammerstad joins other government leaders in expressing concern that fee changes could cripple their ability to pay employees and force layoffs.

Hammerstad questioned whether changes would be pertinent at all in Lake Oswego, where new construction is mostly limited to single lots and new homes that sell in the $1 million range.

Communities feel the pinch

In other communities, larger problems loom.

In Happy Valley, Bethany, Sherwood and Wilsonville along with other areas of both Clackamas and Washington counties, stalled construction projects and vacant subdivision plats blight the communities.

Anne Madden, a spokeswoman for Washington County, said that the county's building department received the Homebuilder's Association letter and is taking it 'very seriously.'

'We, ourselves, are very concerned about revenues, everybody is,' Madden said. 'But we're trying to do the best we can.'

In Tualatin, Mayor Lou Ogden plans a meeting with the Home Builders Association where he is likely to grant extensions for approvals and permits in that town. Both expire faster in Tualatin than in most other jurisdictions.

Though the change will affect only one or two subdivisions initially, more could follow.

Ogden said he was open to talks about any action Tualatin could take to get building back on track there.

'We're interested in looking at ways to not pull the rug out from under these builders as they try to wait out the storm,' he said. 'We'll talk about whatever their issues are. We're all in this together.'

Christian Gaston, reporter for the Pamplin Media Group, contributed to this story.

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