Home builders

Homebuilders sue two Minnesota cities over exorbitant fees

A trade group representing Minnesota home builders has filed lawsuits against two Twin Cities suburbs – Dayton and Corcoran – alleging they charged builders more than $ 5.5 million in permit fees beyond that. state law allows.

Builders often point out that the fees charged by cities are a major factor in driving up house prices – among dozens of other costs – and complain that cities are increasingly charging high fees as a politically acceptable way to raise funds for independent urban projects. They say it serves as a hidden tax for people who don’t live there yet.

But state law requires that building permit fees be “just, reasonable, and proportionate to the actual cost of the service for which the fee is imposed,” such as plan reviews and building inspections. In the case of Dayton and Corcoran, Housing First Minnesota says cities knowingly charged high fees to fund other services and is asking the court to order cities to return money to developers.

“There is no dispute over the need for inspections to ensure the safety and durability of homes. However, this process cannot become a profit center for local governments. We must remember that any city engaging in this practice of extorting new residents with building permits exacerbates the state’s housing problems, ”Housing First Minnesota Executive Director David Siegel said in a press release announcing the prosecution.

Housing First Minnesota, which represents more than 1,000 home builders and renovators, filed the complaints against Corcoran and Dayton in Hennepin County District Court on Monday after a state building code appeal panel convened by the Ministry of Labor and Industry refused to take up the matter, saying they lacked jurisdiction.

In its lawsuit against the city of Dayton, Housing First Minnesota alleges the city raised $ 2.7 million in addition to what it cost it to provide permit and inspection services over a five-year period from 2015 to 2019. And, the nonprofit trade group says Dayton has reported inspection expenses beyond what its internal budget documents show the state Department of Labor and Industry.

In its lawsuit against the city of Corcoran, Housing First Minnesota says the city only paid 35% of what it charged third-party builders for building inspections and blueprint reviews. Corcoran kept the remaining 65% and directed them to what Housing First calls “untied city funds,” such as the city’s “Long Term Planning Fund”.

Housing First cites public documents, including a 2018 email from the Corcoran town administrator stating: “The rest [of the permit revenue] has been used to build up reserves and other funds that are not sufficient. . . For reference, each new housing permit generates on average about $ 3,000 in net income. “

A lawyer for the town of Corcoran declined to comment. Calls to the city of Dayton were not returned.

The Housing Affordability Institute, which advocates reducing development costs, looked at building permit funding statewide and found that cities in Minnesota had collected more than $ 42.5 million in excess income. The report also showed how fees can vary widely from city to city.

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