Multifamily construction costs are set to skyrocket under proposed fee adjustments by Dallas’ Development Services Department.

The Development Services Department (DSD) is proposing across-the-board increases to Dallas’ permitting fees to shore up the department’s budget and align it more with neighboring cities in North Texas.

“Permits are set at specific fees,” said DSD director Andrew Espinoza at a recent Economic Development Committee meeting.

“Let’s say we charge $100 for something we should be charging $150 for. Because we only collect the $100, there is still $50 that we are not collecting. Once the fees are updated, we will be able to collect that full cost,” he explained.

While increasing the department’s various fees could help mitigate DSD’s running deficit, which Dallas taxpayers are footing the bill for, it will likely lead to higher costs for consumers as builders pass those costs on to future tenants.

According to DSD, fees for multifamily developments are assessed based on the number of doors assigned to each project.

For example, a triplex (3 doors) will see fees jump from $825 to $2,533, marking a 207% increase. New multifamily projects with between 25 and 500 doors will also see fees jump about 200%, according to a presentation given to council members by DSD staff.

The fee increase is “substantial” for new multifamily projects because those costs have “historically been relatively low,” claimed Espinoza.

“Anytime we do not collect 100% of the fees, of course, the reserve funding and so on gets decreased. And so, at a certain point, we will be in the red, and we have to either cut services or have the general fund subsidize that,” he said.

DSD is currently running a $22.3 million deficit due to undercharging for its services. This means that DSD is failing to recoup approximately $1.8 million each month for services rendered. With current reserves of about $12 million in the City’s Enterprise Fund, DSD will run out of money before the end of the year if the Dallas City Council does not quickly approve the proposed fee increase.

“The initial study indicates that if we don’t raise fees, we will be operating in the red — in the negative — by fiscal year 25,” said Espinoza.

As previously reported by The Dallas Express, DSD has been plagued with various inefficiencies and periodic permitting backlogs under the stewardship of City Manager T.C. Broadnax.