Harbison: Impact of Housing Downturn

Jim Harbison

The housing statistics for the Las Cruces area are dismal. The latest figures reflect the worst number of new home construction in the past 10 years. According to the figures released by the Dona Ana County Building Services Department through June 2011 there were 308 single family & townhouse building permits issued so far in 2011. This compares to 428 in 2010, 410 in 2009, 545 in 2008, 898 in 2007 and 1,135 in 2006. If we look at the City of Las Cruces we see similar housing construction declines. 

Mayor Richard Berry

It is obvious that there has been a serious and steady decline in new housing starts. The permit value has declined more than $100 million since 2006. There are several reasons for this. First is the serious economic conditions and rising unemployment that faces our nation and our local economy. Second is the mortgage crisis that has plagued homeowners and potential home buyers since 2007. Third are the policies imposed by the Mayor and his anti-business/anti-development coalition whose attitude and philosophy is that developers are the cause of the City’s infrastructure problems.

Martin Chavez

Eighteen months ago Albuquerque Mayor Marty Chavez and the City Council reduced impact fees by 50% for most construction and totally waived them for “green” projects that meet environmental design standards. In March 2011 his successor, Mayor Richard Berry, and the City Council extended the reduced fees for another year. They believe the reduced income from impact fees will be offset by the increased tax revenue generated by construction projects and the higher levels of employment of building trades workers.

After the impact fees were reduced construction permits increased by 46%. The Home Builders Association of Central New Mexico contends the reduction in fees directly contributed to the increase in housing starts. New housing construction has a tremendous impact on the local economy. For each new house built three year-long jobs are created. According to a recent article in the Albuquerque Journal each new house constructed generates approximately $90,000 in GRT for the local economy.

Las Cruces City Hall

In a report from the Las Cruces Community Development Department permits for single family homes have declined by 54.5% and multi-family units have declined by 89% from the 2005-2011 period average. Construction creates job opportunities which reduces the dependence on government subsidized programs, improves individual self-esteem and generates increasing revenues for the City. One of the unintended consequences of impact fess is that they increase the cost of doing business and drive economic development out of the City. The County could see an increase in development activity as a result of these fees thus adding to the urban sprawl that many on the City Council allegedly oppose. Because the business climate is more conducive to growth and development in Texas, we have the interesting phenomenon of driving west on Interstate 10 from El Paso witnessing robust activity prior to the Texas state line and it virtually ceasing to exist once you enter New Mexico.

The Las Cruces City Council continually cites the need for more than 3000 units of “affordable” low-income housing. I wonder how adding nearly $7,000 in impact fees to the cost of a simple residential home is compatible with encouraging development of these types of homes. The policies of this Mayor and his anti-business anti-development coalition will continue to discourage economic prosperity in Las Cruces. Can you imagine what construction of an additional 100 new homes could do for the economy of Las Cruces? Perhaps it’s time to try the Albuquerque approach and suspend impact fees to stimulate economic development here in Las Cruces.

Harbison: Impact of Housing Downturn