Florida’s governor recently signed a new bill into law, House Bill 337, limiting a local government’s ability to impose impact fees on builders and developers embarking on new residential and commercial construction projects. The law, which took effect immediately and whose limits will be applied retroactively for increases in impact fees made since January 1, 2021, aims to prevent counties from hiking up costs associated with new builds.
An impact fee is a one-time fee assessed by local governments to developers and builders to offset a new development’s impact on existing infrastructure. The rationale behind the assessment is to essentially charge a tax on new construction to defray its costs on existing vital services such as schools, parks, roads and emergency services. Think: An increase in residents and users equals more of a burden on existing infrastructure.
Unfortunately, for years developers have complained that the impact fees collected by local governments are not actually used by the municipalities for remediating the impact the new growth has on the infrastructure at all. Oftentimes, developers argue that instead of investing the impact fee funds on improvements to the existing infrastructure affected by a new project, the impact fee funds are diverted to areas not remotely impacted by the new construction and are actually squandered away on other pet projects of local governments.
Prior to this bill becoming law, Florida counties and cities could raise impact fees as much as they wanted. But as of June 4, 2021, jurisdictions can only increase impact fees once every four years in the following manner: Increases between 25 to 50 percent must be spread over four years, while smaller increases would be implemented in two equal installments. A local government interested in surpassing the 50 percent cap would be required to perform a study demonstrating why the increase is justified, host two workshops dedicated to the extraordinary circumstances necessitating the need, and secure the approval of at least two-thirds in a vote of the governing body for the increase.
Opponents of the bill believe that this new law will cause an increase in housing prices in an already burgeoning market that will only burden future homebuyers and inevitably lead to increases in property taxes and declining roads/infrastructure. Others who support the bill argue that it will increase existing home values while promoting growth because it will allow builders/developers some predictability when estimating a project’s cost.
Our firm’s other South Florida real estate attorneys and I will continue monitoring any pending legislation that will impact the industry and informing our readers of this blog. We encourage real estate industry members and followers to enter their email address in the subscription box on the right to automatically receive all our future posts.