Fees on New Homes Among Tops in U.S., Study Shows

Fees for new homes in Orange County to pay for roads, sewers and municipal services are now among the highest in the nation--reaching $21,000 for an average residence in San Juan Capistrano and $19,600 in San Clemente--according to a study released Wednesday by a builders’ organization.

At the same time, as mortgage interest rates inch upward, increases in Orange County’s per capita income have slowed below the national growth rate, according to James Doti, dean of Chapman College’s economics department.

As a result of the fees imposed on developers and builders, the median housing price in the county may soar to $250,000 or more by 1990, said John Erskine, executive director of the Building Industry Assn.’s Orange County chapter, which released the study. The price escalation will slow the county’s economy further and increase the distances Orange County jobholders will have to commute to less expensive housing elsewhere, Erskine said.

New and Resale Prices

Currently, the median price of a new detached single-family residence in Orange County is about $190,000, and the median resale price of an existing home is about $158,000, according to building industry officials.

Some cities are violating state law by increasing developer and builder fees to levels far exceeding the actual cost of delivering the extra services and facilities for which the levies are collected, according to the BIA study.

The law permits exceptions to the state-imposed limit, the report states, but only when authorized by a two-thirds majority vote in the area involved.

The report does not name specific cities that have allegedly violated this section of the state government code.

In fact, BIA officials said they decided not to publish lists comparing total fees charged by the county’s 26 cities because they did not want to create what Erskine called a “Hall of Shame.”

“We did that in 1982,” said Erskine, “and all it did was cause cities on the low ends of the scale to raise their fees after they saw what the cities at the top end were charging.”

No Objection to Fees

However, the BIA report contains a page-by-page, city-by-city itemization of fees levied on both developers and builders.

“We have no objection to paying fees,” Erskine added. “But we believe they should be fair.”

Some fees are difficult to justify, the BIA report states. For example, the study shows that a single-family building permit in unincorporated areas of the county costs $447, while the same permit is about $1,363 in Buena Park and $1,469 in Yorba Linda.

And while BIA officials did not allege wrongdoing by specific cities, they pointed out that San Juan Capistrano and San Clemente, which have the highest building fees, also have adopted strict limits on growth. What’s more, they said, both cities are using builder and developer fees to pay for municipal services previously financed with city tax revenue.

Construction activity in both San Juan Capistrano and San Clemente has declined significantly since adoption of slow-growth ordinances, according to BIA officials.

“You aren’t getting a variety of housing types there either,” said John B. Withers, the Orange County BIA’s director of governmental affairs, referring to San Juan Capistrano. “It’s just the high-end (expensive) stuff. They obviously aren’t interested in housing low- to moderate-income people.”

Withers charged that San Clemente is using some building fee money to offset budget shortages unrelated to burdens caused by new growth.

“There is little of the public left in public facilities,” said Erskine. “They are becoming increasingly financed with private money.”

“They’re making up for general operating shortfalls,” said Irvine builder Michael Ray. “What’s happening is that there are cutbacks at the state and federal levels and everywhere. It’s hard to find sources of funds for the cities. Before long you will see cities impose use taxes, maybe a tax on rents. But the real tragedy was Proposition 13 (the 1978 property tax reform measure), which made it difficult for cities to pay their bills.”

Developer as ‘Bad Guy’

Ray said the BIA report shows clearly that “processing fees are being used to whip the bad guy. . . . I think that people generally don’t like change, and because what a developer does represents changes, it’s easy to paint the developer as the bad guy.”

Philip Bettencourt of Preview Real Estate Services, who produced the fee study for the BIA, said the fee totals for cities can differ widely, in part because of differences in local terrain.

For example, he said, drainage fees are $5,600 per development in San Clemente and $4,707 in Cypress, but Tustin has none.

Donald Moe, vice president of marketing for the Santa Margarita Co., a major development firm, said the publication of the BIA findings is “instructive” because “many people don’t know the basic costs that are being added to the cost of new housing.”

Meanwhile, Erskine and Withers cautioned that cities may accidentally lock themselves into specific growth rates by relying too heavily on builders’ fees to finance municipal services. Specific levels of new construction would have to be permitted in order to generate sufficient income from builders’ fees for the cities to pay their bills.