The cost of building a home in Dallas will likely increase this year as the city reviews the Dallas building permit fee schedule for the first time since 2015 — but it won’t happen until March 27 at the earliest.
The Dallas Development Services Department collects about $28 million in revenue each year, but has an operating cost of about $50 million, according to Development Services Director Andrew Espinoza.
The department isn’t in the red yet but they will be by 2025 if they don’t make a change, Espinoza has said.
Once the department begins operating in the red, they’ll have to cut services or be subsidized by the city’s general fund, Assistant City Manager Majed Al-Ghafry explained.
“For us, it’s imperative that the fund itself pays for the services or collects for the services,” he said.
The City Council was expected to approve a new ordinance last month and implement the new fee schedule by February but postponed the decision due to a lack of feedback and a negative response from industry partners such as the Dallas Builders Association and The Real Estate Council.
Travis Reynolds of The Real Estate Council and David Lehde of the Dallas Builders Association said Wednesday they still have outstanding concerns about the fee hikes.
Lehde said the increased multifamily permit fee is more than $100 higher per permit than other areas in the Dallas BA membership’s 10-county region.
Residential plan review fees and certificates of occupancy also have proposed increases of up to 1,000 percent.
“Like TREC, we urge, due to the amount of impact these fees can have on affordability, that they be phased in,” Lehde said. “We would recommend phasing them over a three-year period. We also have concerns about assumptions that were made by the consultants.”
Consultant’s Assumptions
Dallas has not updated its permitting fees in nine years, several city officials pointed out during Wednesday’s council meeting. MGT Consulting of America completed a fee study in October that reviewed costs associated with building inspections, engineering, GIS, and subdivision teams, Espinoza said.
The study found that DSD provides 40 services that are not codified so the city wasn’t able to charge fees. They’re cleaning up the code so they can charge for those services in addition to the fee increases proposed Wednesday.
The department is not proposing builder impact fees.
DSD committed this year to improving customer service, reducing permitting turnaround times, and improving efficiency following a backlog since the COVID-19 pandemic that frustrated local builders and cost the city tax revenue and new development opportunities.
District 14 Councilman Paul Ridley said it’s imperative that the city correct its current fee structure.
“We’re losing over $20 million a year by not being able to cover our costs, and I don’t see how we make that up on the back end by deferring this decision,” he said. “I’d like to see this decision to increase the fees implemented as soon as possible so we can stop bleeding money for fees that are far too low and haven’t been increased in nine years.”
Dallas Building Permit Fee Increases
Mayor Pro Tem Tennell Atkins expressed concern during a Jan. 9 Economic Development Committee meeting that the department is losing money but wanted to make sure builders understand the fee increases before the new schedule is implemented.
Atkins made the motion Wednesday to defer the item to March 27.
“We should have a clearer understanding of how to move this forward,” he said.
City Manager T.C. Broadnax said costs have gone up significantly over nine years, prompting the need for increased fees.
“It’s really, from a study’s practicality standpoint, a simple math game of how much does all your staff cost?” he said. “And then what are the fees you get to charge for and how many hours, who’s doing it and what is their cost per hour, multiplied by how many of those come through the door that I can estimate on any given year, to then build up to what that new fee needs to be to recover the cost for the body of individuals doing that work.”
Staff will review the numbers and evaluate how phasing in the fees would work, the city manager added.
“When we come back we’ll be able to answer for you the cost and impacts, the phasing in, the timing of it, and what folks can expect to pay — full cost — consistent with the study, different from maybe even staff’s own sensitivities around certain fees,” he said. “At the end of the day, we’ve got to recover our costs and we can’t continue to not have ongoing revenues to support ongoing costs.”
