Homebuilding Costs Set To Skyrocket in Dallas

Construction at a building site | Image by Helen King/Getty Images

Building apartments in Dallas is about to become more expensive as homebuilding costs soar.

The Dallas Builders Association (DBA), a trade association representing all segments of the residential building industry in Dallas, raised concerns Monday about the exorbitant fee increases set to take effect on May 1 and its potential impact on the local economy.

In an interview with The Dallas Express, DBA Director of Government Affairs David Lede said the association is “especially concerned about the significant increase in multifamily permit fees.”

“It’s important to understand that these increases in building costs are ultimately paid for by the homebuyer or even the person building the multifamily project,” Lede said.

Lede explained that any time fees increase, it’s a challenge for the multifamily sector, which already has more items and costs to factor in, including whether “affordable” units are required as part of the development.

“It’s also important to note that these fee increases come on the tail end of recent increases to sewer tap fees, which are already a couple of thousand dollars. The city is also discussing other development-related amendments that could add even further costs if not addressed wisely. So, we always have to look at the total costs,” he explained.

Lede noted that the DBA wants to see an increased focus on addressing inefficiencies within the City’s Development Services Department (DSD) instead of raising builders’ fees.

“These related operations are funded through an enterprise fund. Not only does that fund pull directly from builder fees, but it also has a history of running a surplus,” he said. “Department costs have increased so significantly in such a short time, it raises the question of why.”

As The Dallas Express previously reported, the City of Dallas has not amended its fee schedule since 2015. Despite not updating its fee schedule in nearly a decade, the department has watched its operating expenses balloon, resulting in an annual deficit of $22.3 million or $1.8 million monthly.

One way DSD plans to balance its budget is through a 200% increase to Dallas’ multifamily service fees, which are assessed based on the number of doors assigned to each project.

DSD Director Andrew Espinoza claimed in January that the fee increase is “substantial” for new multifamily projects because those costs have “historically been relatively low.”

Although Dallas City Council members, DSD, and DBA voiced many of the same concerns regarding the increases, Lede noted that the final fee schedule includes higher fees than elsewhere in the region.

Lede added that DSD worked with stakeholders like DBA and The Real Estate Council (TREC) to lower some of the proposed fees. Still, he said the homebuilding community would have preferred that these fee increases be phased in over an extended period to help relieve the economic impact.

The Dallas Express contacted TREC for a statement regarding the fee increases, but a representative of the organization was not immediately available for comment.

Considering Dallas’ lack of affordable units, many families have already been priced out of the local housing market. According to Lede, Dallas is at the point where it’s becoming a struggle for working-class families to afford a medium-priced home. Ultimately, he says working-class families will go wherever they can afford to live.

“You get people who grew up in Dallas and maybe went off to college and then want to return because they want to live in their hometown. That can be a challenge. And we see this across the Metroplex and really across the state,” Lede concluded.

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