Indiana Housing Task Force eyes state help for infrastructure costs rather than builders, buyers and local governments

A study committee trying to find solutions to Indiana’s housing affordability problems on Thursday examined whether state government could front infrastructure costs for new housing — instead of builders, buyers and municipal governments.

“[We should] take a look at infrastructure and how the state can help local communities and developers at all levels achieve infrastructure in place without adding significantly to the cost of the project,” Housing Task Force Co-Chair Rep. Doug Miller, R-Elkhart, said.

Developers of all types bemoaned the costs of creating housing, whether due to rising interest rates and supply chain delays — both largely out of state control — or impact fees, design requirements and lengthy zoning procedures, to which local government advocates resist change.

An impact fee is typically a one-time payment imposed by a local government on a property developer. The fee is meant to offset the financial impact a new development places on public infrastructure such as roads and sewers.

“There are other ways that I think folks can really help us out with those impact fees. One, if the municipalities were able to waive those or reduce those,” said Habitat for Humanity of Indiana State Director Gina Leckron. “Another helpful way to look at this would be to reduce the requirements on house design.”

Leckron, whose organization builds single-family houses for very low-income families, described building in municipalities with two-car garage requirements for families with just one car. That alone adds $15,000 to $20,000, Leckron said.

Accelerate Indiana Municipalities Government Affairs Director Jenna Bentley said she “wouldn’t want to see that preempted at the state level.” The organization advocates on behalf of hundreds of Hoosier cities and towns.

“I’m hesitant — whether it’s design standards [or] whether it’s density — to remove that conversation from happening at the local level,” Bentley said.

Agreement

But speakers of all perspectives coalesced around infrastructure costs as a potentially solvable problem, and state help as a possible solution.

Cook Medical Group, a private Bloomington-based medical device manufacturer, is wading into building its own homes in Orange and Owen Counties because of a stark dearth of affordable, move-in-ready housing for current and potential employees.

Vice President of Public Policy Gretchen Gutman said when the company began looking into building on property it had purchased in West Baden, it positioned the houses off a main sewer line after discovering that building out sewer infrastructure would add a whopping $50,000 to each lot.

“If you’re trying to keep a home at $150,000, and right off the top, you’ve got to pay $50,000 per parcel for the infrastructure, you can’t,” Gutman said. “You can’t build a home for $100,000. I don’t care who you are. You just can’t do it.”

“My first, second, third recommendation, priority requests — on bended knee — would be to put more money into infrastructure to help with this issue,” she added.

Continued work

The conversation built off an initial meeting in late September, when Indiana Builders Association President Paul Schwinghammer floated establishing a state revolving loan fund of about $100 million to offset infrastructure costs, along with five-year residency requirements or similar to prevent abuse by investors.

Local municipalities are increasingly passing costs related to new developments — like for public safety, trash pickup and more — on to builders, and thus, buyers, through impact fees.

Miller and Co-Chair Sen. Linda Rogers, R-Granger, pressed Bentley on if state aid could help municipalities eliminate impact fees. The fees can add thousands apiece to a build.

Bentley hedged, concluding that the future of impact fees depends on the specifics of the theoretical state program. If it’s application-based, she said, and not all developers know about or participate, local governments would likely still assess impact fees.

Multiple speakers also agreed that a state residential tax increment financing tool was underutilized, identifying a specific cap on building as too restrictive for even slow-growing communities to qualify.

Sen. Fady Qaddoura, D-Indianapolis, suggested applying the tool to infrastructure, using the increment to pay for ongoing infrastructure costs.

Task force members also ruminated on how to crack down on the hard-to-contact out-of-state investors that buy up large numbers of homes and rent them out, the potential for tax abatements to attract development and how to get more Hoosiers into building trades.

The task force has one more meeting on Oct. 27. Next up, Miller said, would be to “develop a game plan, and where we want to land in the 2023 legislative session.”

“I think it’s going to be a reasonably broad brushstroke for the committee to vote on,” he said. “And we’ll try and incorporate as many ideas, as many initiatives, that we can move in a single piece of legislation as possible.”