The Building Industry Association of Southern California Inc. (BIASC) and the City of Lancaster jointly announced today that a Building Incentive Stimulus Program launched in 2010 has met and surpassed goals to generate home and commercial growth in the city.
The BIASC applauds Lancaster’s foresight and wisdom in launching a program that has not only generated jobs and business growth, but increased fee revenues to the city. At the core of the program has been Lancaster’s decision to reduce and defer development impact fees up to 30 percent in select parts of the city.
“The decision by Lancaster’s elected leaders to revisit fee structures as part of a homebuilding stimulus program should serve as a model for cities throughout Southern California,” said Holly Schroeder, CEO of the Los Angeles/Ventura County Chapter of the BIASC. “If more communities work with the industry to set fees that reflect the realities of today’s housing market, more homes would be built, more people will be put to work, and more revenues could be collected by local government.”
At a time when new home construction has remained stubbornly low throughout most of the region, Lancaster has seen 559 new single-family homes permitted, along with 33 new commercial/industrial buildings since launching the program in February 2010. The city is experiencing job creation and increased business activity, along with generating $6.8 million in fee revenues.
“The Building Incentive Stimulus Program has been exceedingly effective,” said Lancaster Mayor R. Rex Parris. “In the short term, we are encouraging development, creating jobs and stimulating our local economy. In the longer term, we are bringing in new residents and investing money back into our community.”
A total of nine homebuilders have taken advantage of Lancaster’s incentive program, which provided 20 percent discounts on development impact fees throughout the city, and 30 percent reductions within the downtown corridor within the first year. When the program was extended in 2011, a 25 percent discount was offered on development impact fees for new homes within existing tracts which had been abandoned by the original developers before construction was completed; as well as a deferral on impact fees related to commercial projects. The City of Lancaster recently extended the program for an additional year.
One of the most notable participants has been KB Home, which has seen many projects launch in part because the fee reductions made the developments feasible.
“Without question, the city’s decision to reduce development impact fees has allowed us to move forward in building communities that otherwise might not have made sense financially,” said Tom DiPrima, Executive Vice President of KB Home’s Southern California division. “Essentially, this program has provided KB Home and other homebuilders an incentive to move more aggressively into developing sustainable communities throughout Lancaster. Other cities are now finally realizing that this is a very smart business model, and are now considering adopting similar programs.”
In many cases homebuilders have purchased finished lots in subdivisions that were once abandoned. This has allowed builders like KB Home to complete these communities and create new jobs for area residents. According to the BIA of Southern California, the average fees charged on a new single-family house are about $60,000, between local and county fees, with some communities still demanding upwards of $100,000 or more per home.
“In this market where homes must be priced right to sell, reducing development fees by 25 or 30 percent can make a project financially feasible,” said Schroeder from BIA. “We really hope that other Southern California cities follow Lancaster’s lead and revisit their fee structure. Historically, in Southern California, it has been homebuilding that has led economic recoveries out of prior recessions.”
Nationwide, it is estimated that each new home built results in three new construction jobs and one new long-term job.