The Hanover County Board of Supervisors last month voted to eliminate all future proffers -– a tax on new homes developers pay once the county issues a certificate of occupancy and is then passed on to homebuyers. The county used the money to fund schools and other public facilities needed to keep pace with new development.
On Wednesday, builders with lots waiting to be built out might get even more good news, as the board is set to vote on how to handle any existing lots and their proffers. The board is expected to set a process for developers to either reduce or eliminate the $52.1 million worth of outstanding proffers on 4,300 pending lots in the county.
South Anna District Supervisor Wayne Hazzard said the board’s decision should translate into more development and lower housing costs for Hanover County.
“It was a bad policy that we never should have put in place,” Hazzard said. “There’s a lot more that goes into development than the proffer system, but removing that one stumbling block is a step in the right direction.”
Before the board eliminated its proffer system, Hanover’s $19,503-per-lot proffer was the highest in the region. Richmond and Henrico do not collect proffers, and Chesterfield has a rate of $18,966 per lot.
Todd Rogers, a residential real estate broker with Hometown Realty, said he has about eight properties with proffers of between $11,000 and $13,000. Once he can take out those fees, he said home buyers would see an immediate cost reduction of about 5 percent on a $250,000 home.
“I’ve been on the paying side of proffers since the system came out in 1990 and never liked it,” Rogers said. “It didn’t seem like there was any real motivation for the developers to pay these fees.”
Rogers said that he doesn’t expect a sudden boom in new development but that the decision should make the Hanover market more competitive with Richmond and Henrico.
“For the past four, five years, people have been very careful about choosing where they develop,” he said. “I think this is a great indication that Hanover County is open for business.”
Craig Toalson, CEO of the Home Building Association of Richmond, said the proffer system is outdated and detrimental to home buyers.
“If a builder spends $20,000 for a finished attic or basement, that’s an additional value the consumer can see,” Toalson said. “Consumers weren’t getting any added value out of the proffer system, and in some cases didn’t realize they were paying that extra tax.”
Hanover has collected more than $24.7 million in proffers since the system was instituted 22 years ago, according to the most recent data from the county. That amounts to an average of about $1.1 million a year. In January, the board will vote to replace the lost revenue from the proffer system with a mandatory $10 vehicle registration fee.
Chickahominy District Supervisor Angela Kelly-Wiecek voted against eliminating the proffer. She said that it will boost county growth but that the county hasn’t established a firm way to make up for the lost revenue.
“The question becomes, ‘How do we pay for that growth now that we’ve eliminated this source of revenue?” Kelly-Wiecek said. “The developers I’ve talked to are certainly delighted about the board’s decision. But they’ve also made it clear to me they would have supported a more measured, incremental approach to the elimination.”