It is instructive to look at comments made during the extensive California debate:
After one of the few extensive public debates, which included a study, California passed a disclosure bill, properly recognizing that the fee (1) does not restrain alienation (because the market will adjust), (2) can bring substantial benefits to developments and to communities, (3) is voluntary and (4) has been used extensively with no evidence of harm.
* A bill to ban transfer fees, backed by the California Association of Realtors, was defeated in a Senate committee earlier this month. Private transfer fees, a relatively recent financing tool, are a way to bankroll multimillion dollar development concessions without necessarily affecting a homes initial purchase price. - Jim Sanders, Sacramento Bee (May 21, 2007)
* A bill backed by the Realtors failed to get a single vote. The defeat came at the hands of an alliance between developers and non profits. - See Strange Bills, Stranger Bedfellows. http://www.californiaprogressreport.com
* To the extent the existence of a [transfer] fee impacts the value of property, as long as the fee is fully disclosed the market will adjust to the fee. -Cal. Senate Staff Analysis. April 17, 2007.
* You cant put all of the costs on home buyers and still sell at an affordable price. California Building Industry Association. - Source: BUILDERS, REALTORS SQUARE OFF ON TRANSFER FEES. May 16, 2007. Inman News.
* If builders weren’t allowed to pass along costs in a transfer fee, they’d have to make up for it by adding thousands of dollars to their homes initial selling price, shutting out buyers. - California Building Industry Association.
* Transfer fees represent an alternative to other financing mechanisms that can affect home affordability. - California Building Industry Association.
* Reconveyance financing ... helps keep home prices low by spreading costs over all beneficiaries of a project. - Julie Snyder. Policy Director for non-profit Housing California.
* REALTORS never complain that a house is too expensive, and that’s precisely what happens when builders lump all of their costs into the price of the first home. Why shouldn’t the second and third buyers share the costs? - California Building Industry Association.
Instead of placing 100% of the cost of infrastructure and other improvements onto the shoulders of first time homebuyers, a Capital Recovery Fee allows developers to more fairly apportion costs and to reduce the sales price. Consumers benefit from lower acquisition costs and lower carrying costs. In addition, the fee is voluntary, and will only be paid by a consumer that willingly assumed the obligation.
Right now, funding is not available on commercially reasonable terms, and this is having a devastating impact on the Country. A developer imposing a Capital Recovery Fee has created a future income stream that can be sold. This brings significant out-of-state dollars into each state, and allows developers to pay down development loans. In fact, since the covenant sits behind the lender, lender consent to the sale is required, thus insuring that funds flow to the lender. This reduces foreclosures, makes projects more viable and creates jobs.
In addition to the relief that this funding mechanism can provide to the real estate sector, a portion of all Capital Recovery Fee income is paid to non-profits operating within the community. This tremendous charitable income stream lasts for 99 years, and helps relieve the burden on the public sector.