OCEAN CITY — Encouraging more year-round residents to make the resort their home by relaxing some of the fees associated with new construction or creating other incentives was the subject of debate this week with a decision made to continue pursuing a program.
For several years, the Mayor and Council have heard concerns from property owners and potential homebuilders about the rising cost of developing new homes from impact fees to building permit and inspection fees and a variety of other factors. One north-end property owner and town employee has repeatedly told town officials he has seriously considered building his permanent residence in neighboring Sussex County, Del. because of the disproportionate costs of building the same home on his lot in Ocean City.
Planning and Community Development Director Bill Neville and his staff have spent the last several months developing potential incentive programs to encourage more people to build homes in Ocean City and make the resort their primary residence. On Tuesday, Neville presented some preliminary proposals, and after considerable debate was directed by the Mayor and Council to drill down deeper and develop some incentive and rebate programs.
Neville said the research determined there was an average difference of around $13,000 in property development costs for a new home, or a substantially improved home, between Ocean City and neighboring Sussex County, for example. He suggested a mix-and-match approach with perhaps a combination of relaxing some of the fees or a town contribution to closing costs in partnership with the state. Neville cautioned any approach would have to be directed at encouraging year-round home ownership and not create new loopholes for short-term rental property development.
“The program would apply to new or substantially improved residential development,” he said. “The property owner would have to assure it would be a primary residence. The point of this is encouraging more year-round primary residents. We wouldn’t want to help somebody build a home and then turn it around for a short-term rental. We would have to build in some assurances.”
Neville pointed out Ocean City’s average building permit fee for a single-family home is $3,728, while the average impact fee for new construction is around $3,658, for a combined average of around $7,400.
While the town’s current impact fee structure applies to new construction all over Ocean City, the discussion on Tuesday largely focused on new home construction in the R-1, or single-family home, residential zoning districts. It has been pointed out in the past by contractors and property owners hoping to build homes on their vacant lots that the town’s impact fees often make it cost-prohibitive.
Neville also pointed out the Maryland Mortgage Assistance Program offers a $2,500 one-time contribution to eligible new home builders and the town could provide a $2,500 match for that program to encourage people to build homes and make Ocean City their primary residence. By relaxing the roughly $7,400 in permit and impact fees, and/or contributing a $2,500 match to the state’s mortgage assistance grant for eligible applicants, the cost of building a new home or substantially improving an old one in Ocean City could be reduced by as much as $10,000 to $12,000.
Because Ocean City is essentially built out at around 97 percent with few vacant lots, the town’s cost of offering the rebates on fees or providing a match to the state assistance grants could come fairly cheaply for the town, while providing real incentives for many to build houses and make the resort their home.
“It may not be significant financially,” he said. “If we had 30 new homes, we’d expect 20 percent of them to be primary residences. If that was the case, it might just be a $15,000 line item in the budget.”
Councilman Mark Paddack said the tentative proposals on the table at least began to address some of the concerns of those hoping to build in Ocean City but deterred by the various fees and permit costs.
“I’m not sure if some of these proposals meet the concerns of some of our constituents,” he said. “It’s a good start though.”
Councilman Dennis Dare agreed the proposed incentive programs appeared on the surface to encourage more year-round residents.
“I think it’s a good start,” he said. “You see a lot of our restaurants and retail close down during the winter and more and more services are moving out of town. You have to have year-round residents to sustain them. The strategic plan calls for finding ways to get more people to live in town.”
However, Dare questioned if the proposed incentive programs should focus so keenly on new single-family home construction and wondered if an even-handed program for multi-family development would enhance to goal of achieving more year-round residents.
“I’m not sure I see the distinction between single-family homes and multi-family,” he said. “We might have people that can’t afford to come here and build a $300,000 to $400,000 home, but they might be able to move here and afford a $150,000 to $175,000 townhouse.”
Councilman John Gehrig said encouraging new homeownership would expand the tax base and achieve the goals of making Ocean City an affordable, livable year-round community and questioned if the proposals on the table went far enough.
“If we’re going to do it, the presumption is we’re encouraging more people to move in town, which only increases the property tax base,” he said. “It’s really an investment. I think we can be even more aggressive with it.”
Gehrig suggested any incentive or rebate program should be easily navigated and readily available for potential homebuilders and not mired in too many technical eligibility criteria.
“I don’t want to make this too hard to get, or not worth trying to get,” he said. “I think we need real incentives to get people to move to Ocean City. A lot of people want to move to Ocean City. The question is can they afford it with some of these fees and additional costs.”
Paddack made a motion to instruct Neville and his staff to continue working on a more detailed incentive program and begin crafting an ordinance to achieve the goals. While he certainly supported some form of incentive or rebate program, Gehrig said the proposals on the table were largely conceptual and cautioned against moving too fast on them.
“We’re clearly not ready for a motion on this,” he said. “There are still too many questions. I can’t vote for this yet. I don’t want to give them too many specific guidelines that put them in a box.”
Councilman Matt James said he wanted Neville and his staff to continue to hone the proposals and return with a broad range of options.
“I’d like to see staff continue working on this and bring back all of the options,” he said. “Then, we can look at what works best for us and what meets the needs of people looking to build here. We’re a unique community with not a lot of vacant lots.”
The council voted 6-1, with Gehrig opposed, to instruct staff to continue working on the incentive programs and return with tangible options. For the record, Gehrig said his nay vote was not because he didn’t support the concept, but merely because he wanted more details.