Lewes officials have slashed building permit fees for the Dutchman’s Harvest workforce housing project on Savannah Road, forgoing about $375,000 in revenue, a move the developer says will make the project more affordable. 

The city’s standard fee for a building permit is $2 per square foot per unit. Developer Preston Schell of OA Vantage Point II LLC sought to have the fee reduced to as low as 25 cents per square foot for the community’s 140 units. He said the project’s 14 buildings would be virtually identical, with 11 having the same exact square footage.

“If I was submitting 14 unique buildings, this would be a tougher request to make,” he said at council’s Feb. 10 meeting.

While mayor and city council didn’t go all the way to 25 cents per square foot, they unanimously voted to cut the fee back to 50 cents per square foot, a 75 percent reduction, a $375,000 savings for the developer.

“I didn’t like the rezoning that allowed this to happen because of density and traffic, but since we approved it, I’d like to make it work,” said Councilman Rob Morgan. “I propose we be generous.”

By significantly lowering fees, Schell said, the savings will result in a direct reduction of cost per unit, making each more affordable to the local workforce. He said council’s action could lower the price by $3,500 to $4,000.

Morgan asked how city officials could know for sure the savings are passed through to buyers, noting that by lowering his costs, Schell is lowering his ultimate return.

Schell said he’s selling up to 42 units to Diamond State Community Land Trust at his direct building cost minus a standard developer’s fee. The remaining units will be marked up 15 percent, but will not go any higher.

“I want this audited,” Schell said. “I want [council] and the public at large to know it was priced the way I said it would be.”

If his estimated numbers are off, and he receives more than 15 percent in return, he said he will write a check to Diamond State for the difference.

Diamond State will secure funding to purchase its units, then offer them to buyers who make 60 percent to 80 percent of the average median income of Sussex County – $68,700. The units Diamond State purchases to resell will be priced lower, possibly starting in the mid-$100,000 range, Schell said previously.

Schell’s goal is for one-bedroom units to start in the low $200,000s, while the larger three-bedroom units will be in the low- to mid-$300,000 range.

City Manager Ann Marie Townshend said the reduction in building fees should not have a major impact on the budget. She said the city does not fully budget revenues that will not be sustained year over year. She said other projects, such as the senior living facility on the Kings Highway side of the Dutchman’s Harvest property, are also likely to bring a significant windfall for the city.

Late last year, Schell was also able to realize a $4,500- to $5,000-per-unit savings by reengineering sewer service and sharing costs with the senior living facility.