Builders and Republican lawmakers accused local governments Tuesday of needlessly inflating the cost of housing by overcharging for building permit fees.
Their comments stemmed from a report released by Housing Affordability Institute, an arm of the Builders Association of the Twin Cities, showing a wide gap between what cities earn in building fees and what it costs to provide inspection services.
State rules say the fees should be "proportionate to the actual cost of service." Instead, the report argues that cities are using the additional money to prop up their general funds, or in one case to help finance a City Hall remodeling in Corcoran.
"This is just one of dozens of potential roadblocks to affordability, and frankly it should be one of the easiest to solve," said David Siegel, executive director of the Builders Association of the Twin Cities.
The report relied on annual filings that cities must submit to the state's Department of Labor and Industry, outlining their fees and the costs of providing inspection services. Few cities submitted the reports until last year, when the agency pushed for better compliance with the state mandate.
Minneapolis and St. Paul, the state's two largest cities, have still not submitted the reports.
An analysis of the filings by Housing First Minnesota showed that, in 2018, cities collected $24 million more from building permits than their reported costs. Over the last five years, the total difference was more than $78 million.
"This is an eye-popping number," said Rep. Jim Nash, R-Waconia, who called on cities to refund the additional money. "Seventy-eight million dollars borne on the backs of people who are trying to buy a home and make an investment, live the American dream."
