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FINDING A NEWLY BUILT HOME FOR LESS THAN $250,000 IS TRICKY
SCOTT OLSON
INDIANAPOLIS BUSINESS JOURNAL
March 26, 2016
Newly built homes for under $250,000 are becoming much scarcer in the Indianapolis area, making it harder for rst-time buyers and others to afford one.
Industry experts point to a host of factors for the increasing shortage but say it’s mostly driven by the state’s property tax caps coupled with rising home-building fees charged by municipalities.
The dearth is becoming so pervasive that Steve Lains, CEO of the Builders Association of Greater Indianapolis, referenced it in a recent BAGI report highlighting the nine-county area’s building permit activity.
While only 23 percent of residents in the area can comfortably qualify for a mortgage of $250,000 or more, Lains argued, development costs and local regulations often prohibit homes from being built below that price point.
“It’s gotten frightening when you’re talking about $250,000 as affordability,” Lains told IBJ. “We believe, as an industry, it’s stymieing the opportunity for home ownership.”
Indiana’s property tax system, which limits residential taxes to 1 percent of a home’s assessed value, is partly to blame, experts say. Many cities and towns are forgoing more affordable housing developments because they no longer generate enough in property taxes to cover necessary services, particularly in a growing suburb.
“If you want ‘X’ number of policemen and remen, we need this revenue to maintain that level,” Noblesville City Councilor Greg O’Connor recently told IBJ.
Also, more communities are charging higher fees to construct a home, which is driving up prices. Road and park impact fees, in addition to sewer and water availability fees, might add $7,000 to $10,000 to the cost of building, said Paul Rioux, president of Platinum Properties.
Rioux has been in the home-building and residential development business for 30 years and in 1997 founded Platinum, which develops and sells home lots to builders.
He said the largest expense a builder pays when constructing a home is
the price of a lot. But the higher fees, coupled with the property-tax issue, are making it harder for builders to justify building less-expensive homes.
“There’s a great misconception that a house has to have a certain value or it doesn’t pay its way because the taxes you get aren’t enough to cover the cost of the home,” Rioux said. “That’s a very simplistic view of home sales, in general.”
Last month, Indianapolis-area home builders enjoyed their best February in almost a decade, ling the most construction permits for the month since 2007.
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