For Minnesota builders, Supreme Court victory could mean a break on fees

A Minnesota Supreme Court decision that upholds limits on how much communities can charge developers is being hailed as a major victory for those who argue that such fees are making housing in the Twin Cities unaffordable.

The new ruling agreed with an appeals court's backing of New Brighton-based developer Martin Harstad, who argued that he shouldn't have to pay for future road improvements outside a housing development he wanted to build in Woodbury.

"This is a landmark decision," said David Siegel, executive director of Housing First Minnesota, a trade group formerly known as the Builders Association of the Twin Cities. "This is an example of how difficult it is to fight city hall."

The decision is expected to provide relief for Minnesota home buyers and builders and is guaranteed to spark deeper debates about the fees, which are levied by municipalities before development can start to help pay for roads, streets, curbs, gutters and other infrastructure.

Harstad submitted plans in 2015 to build about 180 homes in a Woodbury development called Bailey Park. He filed the suit in January 2016 and put the plans on hold after city officials said they wanted an additional $1.3 million in fees — about $7,000 per house — to help fund future improvements in other parts of the city.

Jason Egerstrom, a spokesman for Woodbury, said the city is evaluating the impact of last week's decision. "We look forward to working with the building and development community to provide high-quality neighborhoods, while ensuring development costs will not be borne solely by the city's taxpayers," he said.

These are thorny issues for Twin Cities communities that want to encourage growth while ensuring there's a way to pay for the additional infrastructure needed to support that development without raising taxes.

"At this point the league and our city members are reading the decision and assessing the next steps, which could include some sort of legislative solution," she said.

The issue has been a top priority for Housing First Minnesota, which represents more than 1,200 builders, remodelers, developers and industry suppliers throughout the state.

Siegel said that while some fees are necessary, they can represent 25 to 30 percent of the cost of a new house. That's a major barrier when it comes to making houses more affordable in the Twin Cities, which he says is one of the most expensive places in the nation to build a home.

"Some regulations and codes and fees are necessary, we're not saying none of them are appropriate," he said. "The challenge is balancing the cost of development with the cost of homeownership."

It's unclear how many cities are charging such fees, so Housing First Minnesota plans to use the decision as a springboard for a deeper examination of the issue. The group is contacting the region's top 25 cities for housing development for detailed fee structure information. The group also will contact various municipalities to make sure they're in compliance with the recent Supreme Court decision.