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Monday, August 17, 2009

Madison Needs Two-Tier Building Permit Fees: Let's Discount Renovation and Small Houses!

Thinking about Jerae and Kendra's fight for their self-evident right to a 42-foot garage got me thinking about Madison's building code. I've grumbled before that the current building permit fee structure is grossly regressive. It occurs to me that the building permit fee structure may also be partly responsible for the supposed lack of affordable housing in Madison.

Now whether we lack affordable housing is open for debate. The LAIC claims to have data showing we lack good affordable housing, but that data has never been made public, so we can only go by what we see on the market... like the $115K house the LAIC built in Silver Creek Circle that, as of Friday, is still being advertised for sale in the Madison Daily Leader.

But let's assume there is a shortage of quality affordable housing. The best housing deals will be small new houses and properly renovated old houses. But small new construction and renovation are exactly the projects hit hardest percentagewise by Madison's building permit fees. Folks looking to build or renovate on a small budget spend a larger percentage of their scarce money on city paperwork than do the big developers erecting swanky digs for wealth buyers.

Perhaps the city could boost the supply of affordable houses and the restoration of older houses in existing neighborhoods by changing its building permit fee structure. The simplest change would be to return to the flat fee and $1/thousand-value scheme or some similar simple uniform percentage fee.

But the city could go farther: why not create a two-tiered permit scheme? Right now, you pay the same for a building permit whether you are spending $200,000 to build a new house or to renovate an old house (I know, that would be a lot fo renovation!). Imagine instead if we set different permit fees for new construction and for renovation: charge maybe 1% of value for new construction permits and 0.5% of value for renovation permits. The dollar difference may not be huge, but a $200 break on a $50K renovation project will buy a lot of construction glue and screws. More importantly, such a break on permit fees for renovation would acknowledge that older homes add character and charm to neighborhoods that are worth preserving.

If Madison needs more affordable housing, and if we want to maintain a close-knit, walkable community, we need city policies that support such housing and preserves existing neighborhoods close to the heart of the city. A new building permit fee structure would be a useful step in that direction.

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