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Trimming new housing costs

Proposed strategy would spread out costs

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POSTED January 14, 2010 1:40 a.m.
Changing how Manteca has developers cover the tab for major infrastructure could reduce the cost of building a typical home by about $100.

It would also spread the cost of improvements such as required water wells upfront across all development instead of having the developer whose project triggers the need for the facilities pay for it and then wait for reimbursement when other projects that benefit are built down the road. Under the current system there is no way of guaranteeing how many  years – if ever – a developer will be fully reimbursed for paying for improvements designed to serve a larger area than their particular subdivision.

The rethinking of the subdivision development process is in response to the City Council’s directive to municipal staff to find ways to get more of the building trades back to work by helping pick up the pace of new home construction.

One of the biggest stumbling blocks is the amount of money that developers have to put up front. By spreading out all offsite improvement costs among all development and not making the builder that triggers the need for the offsite infrastructure foot the entire bill and wait to be reimbursed, it could reduce the direct costs to move a project forward by 25 percent.

In the hypothetical Manteca subdivision model put together by Public Works Director Mark Houghton from information gleaned from local builders, it costs $11,290 per house in a typical 250-home subdivision with 4.2 homes per acre to pay for offsite improvements and another $19,800 per home for on-site improvements in the new neighborhood.

Most developers phase such large projects. What they can’t build in phases are the offsite improvements.

By shifting how the cost is covered by the development community it reduces the impact for specific projects plus substantially reduces their financing.

Under the model put together by Houghton, it could cut the cost of financing for all off-site improvements and initial on-site improvements by 50 percent to $250,000.

It essentially assumes the $3 million tab per subdivision for off-site improvements will end up having $1.5 million paid upfront by the developer with the remaining $1.5 million collected when fees are paid at the time building permits are issued.

That reduces the amount of money that a developer has to borrow and makes the project a bit less precarious.
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