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City tries to tempt home builders
by Rick DeClue · News · March 26, 2015
The City of West Branch wants to ramp up home building and on Monday reviewed a draft of incentives for builders.
Working with developers, builders, realtors and bankers to try to create a plan for more growth and more housing choices, a city committee drew up incentives like five-year rebates of the city’s portion of property taxes, lower building permit fees and more.
Roger Laughlin, head of Laughlin Design and chairman of the city’s Planning and Zoning Commission, and Jerry Sexton of Sexton Construction said the city’s Development Incentives Committee wants to increase the number of new homes built each year, as well as provide a wider array of new home prices in town.
Laughlin told the city council on Monday that the goal is to add to the current growth rate of two to three new homes per year.
“We just want a few more,” Sexton said.
Laughlin also said builders feel that the only price range that makes sense in West Branch is in the $300,000 plus range, which prevents many prospective buyers from looking at the city.
City Administrator Matt Muckler said the growth estimate for new homes is somewhat low. The city issued three new single-family housing permits in 2014, but nine permits were issued in 2013.
However, no one on the council disputed the importance of more growth or whether an incentive program should be considered. It was less clear how the incentives might lead to more varied housing prices, especially more affordable options.
In July 2013, Main Street Iowa reported that West Branch needed more housing, saying about 4.8 percent of homes were vacant, almost half of the 8.7 percent average for Iowa and almost a third of the 11.4 percent average in the United States.
Rebating property taxes could cost the city up to $1,273 per year for a new home valued at $250,000 to approximately $1,500 per year for a $350,000 home, according to city estimates.
Laughlin pointed out that he owns a few lots in West Branch that he is waiting to develop. He pays as low as $20 per year on some, so the city is effectively getting nothing from those lots today.
He also said the builders’ focus when they build a “spec” house, i.e. without a buyer up front, is simply to sell the house. The longer they have to hold onto a house before it sells increases interest costs and reduces profits.
Rather than go into the builder’s pocket, the incentives can provide flexibility to sell the house quicker, Laughlin said.
The committee recommends the tax rebate also apply to improvements of over $50,000 to existing houses. No details were provided on how this rebate would work.
For new homes, the current building permit is $2,500. The committee recommends lowering that fee to as low as $500, but charging builders for new water meters and sensor-reading equipment. The city currently pays $250 for these.
Another potential incentive is a lower sewer and water hook-up fee.
Council member Tim Shields asked whether the committee had looked at other community’s incentive programs.
Laughlin cited Wilton and Tripoli as two examples. He said Wilton’s program contains similar incentives as those being considered by the committee. Unfortunately, he said, Wilton instituted their program shortly after the housing market setback in 2007, so they did not get much response.
Tripoli’s program is much more complicated, and has only been in place for a year. It was noted that Tripoli’s tax rebate incentive is set at a level of 50 percent of that city’s portion of taxes for five years.
Council member Mary Beth Stevenson said other nearby areas see growth in housing and asked, “Why not here?”
Sexton answered, “We have been asking that question for 20 years.”
Laughlin said Tiffin is an example of a town that has seen nice growth because people in Iowa City tend to look west for new housing opportunities. Tiffin does not have a developer’s incentive plan.
“It is hard to get people to even look at West Branch and understand how easy it is to get from here to Iowa City – what an easy commute it is,” Mayor Mark Worrell added.
Several council members want to know the potential short-term and long-term impact on city finances.
Laughlin said the committee is asking for input from the council and confirmation that this is a direction the city wants to take. Laughlin also asked what the city might be willing to do to attract one or two Parade of Homes entries in West Branch next year.
“Parade of Homes could bring a lot of people to look at West Branch,” he said.
Everyone agreed that any potential incentive plan would have to be well-publicized in the development community, though council member Brian Pierce cautioned about making the city look “too desperate for growth.”
Muckler asked Laughlin and Sexton to develop several options incorporating different incentives or levels of incentives so that city staff can analyze them to try and answer some of the council’s questions at the next council meeting.
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