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LEAGUE OF <br />MINNESOTA <br />CITIES <br />CONNECTING & INNOVATING <br />SINCE 1913 <br />Cities and Residential Development Fees <br />This information can help you discuss how development fees and expenses work in your city. <br />Published August 2019 <br />The Issue <br />• Development in a community should pay for development. Related public infrastructure <br />necessary for homes within a new residential development should be funded by developers, <br />not by existing property tax payers who already reside in the community. <br />• Cities have a responsibility for the health, welfare, and safety of residents, and for providing <br />essential neighborhood infrastructure —safe streets, water and sewer service, and utilities. <br />• The existing funding mechanism for public infrastructure development includes city <br />collections of developer fees. Those fees cover the city's costs related to the review, approval, <br />and inspection of the development —cities charge these fees on a cost recovery basis. <br />• Developers are not coerced into a fee agreement with the city. Instead, they negotiate and <br />enter into development agreements with cities that outlines- what is paid for to support the <br />development. <br />Misleading Housing Affordability Reports <br />• A recent report distributed by a developers' advocacy organization called the Housing <br />Affordability Institute and titled "Priced Out: The True Cost of Minnesota's Broken Housing <br />Market" paints an incomplete and inaccurate picture of the role that development fees play <br />in housing development costs for consumers. <br />• The report examined 10 cities selected by the authors, approximately 1% of all cities in the <br />state. <br />• Though the report focuses on city fees, the largest cost variables for building a home remain <br />labor and materials at 48-55% (dictated by the developer) followed by land costs. City costs <br />are not explicitly listed as significant cost variables in the report. <br />• The report is muddy and misleading when it comes to defining a fee. In one published <br />example cited by the authors, costs for a pool that a developer chose to build is inaccurately <br />portrayed as a city fee. <br />145 UNIVERSITY AVE. WEST PHONE: (651) 281-1200 FAX: (651) 281-1299 <br />ST. PAUL, MN 55103-2044 TOLL FREE: (800) 925-1122 WEB: WWW.LMC.oRG <br />