Home builders: Cities gouge with permit fees to fund other needs

Several legislators are calling for hearings and audits to investigate allegations that many Minnesota cites overcharge for building permits. But cities say the industry report generating legislative anger is misleading and flawed.

The report from Housing First Minnesota, a home builder trade group, accuses Woodbury, Edina, Plymouth and other cities of overcharging for building permits by nearly $80 million combined statewide over five years, and using the money for unrelated expenses. State law mandates that fees reflect the actual cost of services.

House Assistant Minority Leader Jim Nash, R-Waconia, says excessive fees get passed on to homebuyers. “Do something fair,” he said. “Don’t look at the person moving into your community as a cash cow.”

But Irene Kao, a lobbyist for the League of Minnesota Cities, disputed the report's methodology and findings. “It is a snapshot and a bit of an unfair characterization of the data,” she said.

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Kao said the trade group cherry-picked data and some cities' permit fees fail to cover their oversight costs.

Woodbury’s spokesperson Jason Egerstrom said the city is reviewing the builders’ report but said there can be significant differences in how communities define expenses and revenue.

“We’re reviewing the report in its entirety and gathering additional information,” he said. “The report recognizes that there could be some variabilites in how expenses and revenues were defined by each community.”

Builders say that exorbitant building permit fees can add thousands of dollars to the cost of home.

“This is one example of these cost drivers that are making is so difficult to have affordable housing in our state,” said David Siegel, executive director of Housing First Minnesota.

Most cities are supposed to file annual building fee permit reports with the state. But many communities, including Minneapolis and St. Paul, have not filed reports or failed to file them every year.