Permits for new construction on seven homes have been issued in Annandale so far this year, and it is possible that number could nearly double by the end of this month.
Annandale City Council members discussed results of the housing incentive program they approved in May during their meeting on Monday, Dec. 7.
City Administrator Kelly Hinnenkamp explained that one new home permit had been issued prior to implementation of the program, which waives the $6,800 fee to access sewer and water services for new homes.
After that, a permit for a home valued at more than $300,000 was issued at the end of May, another for a $245,000 home was issued in July, and two permits for homes valued at $200,000 and $156,000 were issued in August. Two additional permits for homes valued at $180,000 and $179,000 were issued in September and November, respectively.
The total value of the six permits issued under the incentive program was more than $1.2 million. Those homes will produce annual tax revenue of more than $8,600, meaning that the payback period to replace the loss of $40,800 in fee revenue with new, ongoing tax revenue is a little over 4.7 years.
Three of the six permits issued since May were for homes in the Southbrook development, and three of the permits were for properties on Brown Avenue.
Hinnenkamp told council members last week that it is possible that up to six additional permits could be issued before the program is set to expire at the end of the year.
Mayor Dwight "Dewey" Gunnarson asked if there was any information about whether the incentive program was the cause of the growth in permits issued. In the last five years there has been an average of just 2.6 new homes built annually. That slow growth in the wake of the Great Recession is substantially lower than the average of 28.3 homes built annually in 2000 to 2010.
"If I asked, all of them would say yes, that they wouldn’t have done it without (the incentive)," said Hinnenkamp. "It’s difficult. This is the challenge. You don’t know how many would have and how many wouldn’t have. I do think there were a couple, yes, that were motivated because of this. Now would they have built eventually? Yes, probably. But they were motivated because of this program. And the six that were out there, if they do come in at the end of the year, it’s because of that."
Councilor Corey Czycalla, who works as a realtor, said he worked with one of those who obtained a permit and said the incentive program was a factor.
"They were looking to build, but I think this was the decision that made them do it now vs. later," he said of the council’s vote to implement the program.
Continue the incentive?
Council members decided to table any decision on whether or not to continue the incentive program in 2016 until at least January in order to see how many of the six additional projects actually materialize.
"I’d like to wait and see if these trickle in toward the end of the year knowing that it might not be available to them next year," said councilor Shelly Jonas. "Maybe it will motivate them to make the decision to move ahead."
Hinnenkamp said there was no real drawback to delaying a decision.
"There isn’t going to be any rush to having it available Jan. 1 because not too many people are going to pull permits in January through March," she said.
Additional questions the council will need to answer, in addition to whether the program continues or not, is a limit for how many homes would receive the incentive and what value those homes must be to qualify. This year the fee waiver was capped at 15 permits, and all homes must have had a value of at least $125,000.
Gunnarson said a development expansion next year was "a good possibility" (later in the week at the chamber of commerce meeting he said an expansion of Triplett Farms could be in the works) that could use up the full 15 homes allowed by the incentive under this year’s guidelines.
"We don’t have to do 15 (next year)," Gunnarson said. "We could do 10 or 12."
Council members also briefly discussed raising the qualifying value of the home in order to encourage higher-value homes and recoup the lost fee revenue faster, but made no decisions.
The matter will be addressed again at a later date.
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