Policy Points: Transportation Impact Fees

The Seattle City Council recently rejected a proposal to move forward with a comprehensive plan amendment that would pave the way for Transportation Impact Fees in the City. As a commercial real estate association that advocates on behalf of our members, NAIOP Washington State opposed this effort to add unnecessary and harmful fees to the already costly development process. Though the City made the right decision, other municipalities continue to consider impact fees or fee increases, and the proposal could come forward again in Seattle in the future.

What are impact fees?

Impact fees are one-time assessments on the development of new construction. Because more people will move into or work in an area with the creation of the new building, some local governments believe these fees are necessary to improve things like roads, sidewalks, and other transportation infrastructure.

What are the effects of impact fees?

Impact fees add a lot of cost to development.  Research shows[1] that the addition of municipal fees causes an increase in rent for tenants as the cost of the fees are capitalized into heightened land prices.  In some cases, entire projects are no longer feasible. 

Furthermore, impact fees incorrectly target projects that facilitate urban density. Transportation studies[2] have shown that density encourages walking as a primary mode of transportation, rather than driving or public transit. When people live within a short distance of work or retail, they opt to get most places on foot.  With the implementation of impact fees, development often sprawls outward rather than upward, forcing a heightened dependence on single occupancy vehicles. Transportation impact fees are a suburban tool that can have counterintuitive consequences in an urban setting.

Both housing creators and local governments want more units for more people, but impact fees add yet another hurdle to the housing pipeline.  To make cities greener and more walkable, cities should encourage density.

Why does NAIOPWA oppose the type of fees that were proposed in Seattle?

Many areas of the country, including the greater Seattle area, are experiencing devastating housing shortages caused by multiple factors.  In a time of shortage, increasing the cost of development means fewer new housing units added to the market, higher rents, and a worsening of an already dire crisis.

The construction industry is in a full recession. Amidst this crisis, an office market that may take decades to recover, and the highest interest rates in decades, new development projects rarely pencil. These market factors will further constrain development of density near transit, and adding thousands of dollars of additional fees to new housing units will only result in higher rents and less affordable housing – if projects are able to move forward at all.

NAIOPWA is a leading voice for commercial real estate advocacy in Washington State. To contribute to our Government Affairs program, visit naiopwa.org/advocacy.

[1] Evans-Cowley, J. S., & Lawhon, L. L. (2003). The Effects of Impact Fees on the Price of Housing and Land: a Literature Review. Journal of Planning Literature, 17(3), 351-359. https://doi.org/10.1177/0885412202239137

[2] McKnight-Slottee, M., Bae, C.-H. C., & McCormack, E. (2022). Site-Specific Transportation Demand Management: Case of Seattle’s Transportation Management Program, 1988–2015. Transportation Research Record, 2676(1), 573-583. https://doi.org/10.1177/03611981211035765

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