Development Impact Fees Research Articles

The Effect of Development Impact Fees on Housing Values

This paper examines the effects of impact fees on housing prices using data from 46,420properties in 63 Texas cities, 38 of which impose an impact fee. After controlling forself-selection of the imposition of the impact fee, findings indicate that the prices forboth new and existing homes in areas with impact fees are 1.44% and 6.5% higher,respectively, compared to those in areas without impact fees. The imposition of impactfees is associated with increased property values that benefit homeowners and increasethe property tax base. A coincident negative impact is decreased home affordability.

Development impact fees and employment

Development impact fees have sparked considerable controversy as they have spread rapidly in usage throughout the United States. One contentious issue is the effect that these fees have on local economic development. While some scholars have argued that impact fees attract jobs by reducing developers' uncertainty, the development community maintains that they operate as an excise tax, reducing commercial development and driving away jobs. We use Florida county level panel data, from 1990–2005, to investigate the relationship between private employment and different types of impact fees. We find that commercial fees and school fees have countervailing effects, with the former repelling jobs and the latter attracting jobs. These results are consistent with our theory driven expectations. Our investigation also suggests that differences between our results and those obtained in prior studies can be attributed to two factors: the latter studies' violation of the condition of strict exogeneity required for consistent estimation and a failure to account for differential employment effects across various types of impact fees.

Development Impact Fees 2006: A Year in Review

Abstract A number of significant impact fee cases were decided in 2006 and new legislation was adopted in Florida, a state with a long history with “common law” impact fees. While the cases turned significantly on state law grounds, they are important to anyone who practices in the area. First, impact fees increasingly are becoming an indispensable source of revenue for communities struggling to provide infrastructure to new growth. As communities' reliance on this source of funding becomes more critical, several things have happened.

The Effects Of Impact Fees On Multifamily Housing Construction*

Abstract. Development impact fees may create more housing opportunities for lower‐income households within suburban areas if there is a fiscal incentive behind the adoption of exclusionary land‐use regulations. Using panel data estimation techniques that allow us to control for unobservable heterogeneity and potential endogeneities, we estimate the effects of different types of impact fees on multifamily housing construction using data from Florida counties. Impact fees earmarked for public services other than for offsite water and sewer system improvements are found to expand the stock of multifamily housing construction within inner suburban areas. Water/sewer impact fees, on the other hand, are found to reduce construction throughout the entire metropolitan area.

Local Choices for Development Impact Fees

This article investigates the patterns and determinants of local impact-fee adoptions. The theoretical framework combines political market approaches based in interest-group theories of property rights and diffusion theories of innovation. Event history analysis is employed to estimate impact-fee adoptions in 66 Florida counties from 1977 to 2001. The empirical results demonstrate clear spatial and temporal patterns, showing that counties experiencing rapid growth actively adopted impact fees. The findings also provide several lessons. First, the development community has a significant influence on the adoption or nonadoption of impact fees. Second, intergovernmental constraints (or incentives) affect local choice. Third, counties are more likely to adopt impact fees as more neighboring counties have adopted them. Fourth, administrative capacity is a critical resource that influences impact fee adoptions. Fifth, the results confirm that rapid growth promotes impact fee adoptions.

Taxes and Fees as Forms of Land Use Regulation

In this article I expand on Turnbull’s presentation by highlighting two important aspects of regulations and their effects on land use. First, I summarize what we know about the dynamic effects of property taxation and discuss alternative tax regimes and their implications for land use. Second, I analyze the role of development impact fees and consider ways in which this new financing method may be rationalized.

Determinants of Suburban Development Controls: A Fischel Expedition

In addition to land-use zoning, development controls in the suburban municipalities of metropolitan Chicago include architectural reviews, appearance regulations, historical preservation areas, enterprise zones, tax-increment financing districts, development impact fees and regulations pertaining to group homes, mobile homes, factory-assembled homes and adult uses. Results of a factor analysis imply that development control policies tend to cluster into quality development regulations, regulations aimed at lower-class development and growth controls. Subsequent econometric analysis suggests that larger suburbs make greater use of nearly all types of development control. Suburbs with new housing and high median household incomes tend to have complex single-family zoning provisions. Suburbs with lower incomes, larger minority populations and greater poverty rates are more likely to use Enterprise Zones and TIF districts, have more complex zoning for apartment buildings and tend not to have development impact fees.

Politics, Institutions and Local Land-use Regulation

This article investigates the factors that account for second-generation land-use restrictions that result from comprehensive planning processes. After a review of the evolution of growth management policy in the US variation among Florida counties in the adoption of development impact fees and regulatory complexity is examined. Political system institutions were found to be related to growth management policies as predicted by distributive theories of urban politics. In particular, elected mayor-commission government was linked to growth management. These results indicate that second-generation land-use regulation may be driven as much by the political incentives of local actors as the preferences of the median voter.

The Effects of Impact Fees on the Price of Housing and Land: a Literature Review

Since the 1970s, development impact fees have emerged as a way to pass the cost of new infrastructure to the development community. Although development impact fees intend to transfer the burden of infrastructure provision to the developer, it is widely believed that the homebuyer ultimately absorbs the cost through inflated housing and land prices. This article examines the planning practice implications of development impact fees on housing and land prices. The review of the literature suggests that impact fees contribute to housing price infation in communities where there are no reasonable housing substitutes and that tax burden and infrastructure enhancements are capitalized into the price of home and land.

Development Impact Fees and the Acquisition of Infrastructure

This article considers the impact that the use of impact development fees has on the level of capital investment made by local governments in the United States. Using a sample of 85 cities, we find that the use of fees is associated with lower levels of capital spending. The data also reveal that the debt-to-expenditure ratio for these cities is associated with higher levels of capital spending, leading us to conclude that fees act as a quasi-pricing mechanism regulating the amount of capital investment demanded by developers.

Do Development Impact Fees Reduce the Rate of Residential Development?

ABSTRACT Over the last twenty‐five years local governments in the United States and Canada have increasingly used impact fees and other development exactions as methods of financing capital and infrastructure requirements mandated by residential growth. While several studies have examined the effects of impact fees on housing and land prices, rigorous empirical analysis of their effects on residential development is lacking. In this paper a sample of all municipalities in DuPage County, Illinois from 1977 through 1992 is used to examine the effects of impact fees on the rate of residential development. The empirical results show that impact fees reduce rates of residential development by more than 25 percent.

Concurrency

Concurrency is an infrastructure finance and growth management policy implemented by local government. It is a policy designed to match public facilities and private development. When implemented, concurrency policy withholds land development approval unless selectedfacilities and services exist in accordance with locally adopted level of service standards by the time the impacts of land development on thosefacilities occur Concurrency is the latestpolicy in a cumulative series of land use regulations by local governments that requires developers to pay for infrastructure needed to serve new urban land development. Concurrency policies offer an effective supplement to development impact fees and land use regulations typically employed by local governments today. Local governments may find concurrency a viable growth management tool as well as an infrastructure management alternative, but local officials should be aware how the unintended consequences and actual outcomes of concurrency may differ from the best intentions of policy makers.

The real cost of growth in Oregon

The costs of growth are little known, poorly understood and typically understated. This study is an initial effort to provide a more complete understanding of the current costs of growth in Oregon. While more than two dozen cost areas are identified, the focus is on basic physical infrastructure required for urban development. A “proportionate share” costing method is used to determine the public infrastructure costs associated with the construction of a typical single-family house. Each increment of growth is allocated costs for only the increment of system capacity required to serve it. Cost figures are from representative projects recently completed or underway in Oregon. The result is a composite of recent cost data selected to be representative of the state as a whole. An analysis of seven public infrastructure cost areas associated with the construction of a typical single-family house—including public facilities for schools, sewer, storm drainage, roads, water service, parks and recreation, and fire protection—shows that the total cost is about $24,500 per house. Oregon's development impact fees are recovering only a fraction of these costs. As a result, most of these public infrastructure costs are distributed across the entire population of a community through property taxes or general obligation bonds, whereas the benefits of these investments accrue primarily to the new development. The methodology used in this study can be easily replicated and may provide a useful tool for communities trying to obtain better information about the economic and fiscal impacts of urban growth. A review of relevant literature and references are provided.

Development impact fees: Modeling future growth and economic development in a south Carolina community

User fees are an attractive alternative to general taxes, especially property taxes, insofar as they are stable and appropriate. The development impact fee is sometimes used in growing communities, and can relieve the service cost burden of new development to existing residents in the short term. Their proper use demands forecasting development trends, population growth and economic conditions. The city of Mount Pleasant, South Carolina - a suburb of Charleston - has used simple models to assess impact fees for the past seven years. This paper will describe the models used to determine impact fees and also describe a more filly developed revenue model used to predict future growth of impact fees as one category of local revenue.

Suburbanization of jobs and the journey to work: A submarket analysis of commuting in the San Francisco bay area

AbstractInrecent years, a debate has brewed over whether the decentralization of employment has been beneficial from a regional standpoint. In this article, we focus on one aspect of the debate: how the relocation of office workers from a downtown to a suburban location affects commuting patterns and mode choice. From a survey of 320 former downtown San Francisco workers who now work in the suburbs, we found that the average distance traveled remained essentially unchanged and that the average commuting speed increased. The most dramatic change, however, was the switch from public transit to drive‐alone commuting. In the aggregate, we estimate that the change in job location was associated with nearly a threefold increase in vehicle miles traveled to work. While from a personal standpoint, employees seemed better off since they got to work faster and more comfortably, from a larger social and environmental perspective, the costs could be significant. More detailed analyses of commuter submarkets revealed that the transportation impacts vary considerably depending on whether the original residence was in the suburbs or central city and whether relocated workers had moved their residences in recent years. In general, those who remained in San Francisco and became reverse commuters were worst off whereas those who moved their residences out of the city were much better off in terms of job access. The article concludes that road pricing would be the best way to force motorists to internalize the external costs of increased drive‐alone commuting. Second‐best options would be to introduce development impact fees or employer‐based trip reduction regulations.

Impact Fees: Practical Guide for Calculation and Implementation

The use of development impact fees (DIFs) to finance public facilities necessary to accommodate new growth is a concept that has gained acceptance in recent years. California and Florida are considered by many to be the leading areas for the development of theory, practical models, and legislation for determining growth‐related costs and calculating impact fees for new construction. Two methods of calculation of impact fees are discussed: inductive and deductive. A total of 22 potential impact fees for public facilities have been identified, including the conventional water, sewer, and street impact fees. Other potential impact fees include public safety facilities (police and fire), library, public art, and day‐care facilities. The consequences of not using impact fees to offset the cost of providing adequate public facilities for new growth are far‐reaching. Often the full effects of growth are not felt, or recognized, by the community for many years. The community may simply wake up one day to discover...

An Empirical Estimation of the Price Effects of Development Impact Fees

Empirical analysis of the price of vacant lots sold in three Toronto suburban municipalities during the 1977-86 period shows that development impact fees directly increased lot prices by approximately 1.2 times the size of the fee. The extent of the increase was related to city growth rates. In general, the faster the rate of growth the lower was the price effect of development impact fees. The effects of growth, however, were not consistent across the three municipalities as one municipality appeared to be lowering its fees in response to reductions in growth rates. The policy environment within which fees are implemented and the way fees are adjusted appear to influence their effect on lot prices. The estimated model also suggests that increases in expected future construction costs reduce current lot prices. General increases in the consumers' shelter costs tend to inflate the price of vacant lots. The expectation of future increases in the cost of land development, whether it is due to increases in material prices, wages, development approval processes, growth controls or impact fees, tends to reduce current lot prices. The indirect price effects of introducing and expanding development impact fees tend to counter their direct effects by reducing the size of urban growth premiums.

Positive Influence of Impact‐Fee in Urban Planning and Development

Policymakers seem to prefer that sellers of buildable land pay development impact fees in the form of lower land prices, or that builders pay those fees in the form of lower profits. Developers assert that home buyers will pay fees in higher prices. Who really pays the fees? The economic incidence of impact fees is investigated in Sarasota County, Florida. Regression analysis shows that impact fees are positively associated with residential urban land prices. Positive capitalization of impact fees in the urban land market may be due to: (1) Land buyers bidding up land value because impact fees to be paid in the future ensure extension of essential services, thus making land values rise by the expectations of facility extension; (2) the predictability of fee payment, usually through explicit fee schedules; and (3) all the planning and capital programming required to make impact fees legally defensible that has the ultimate effect of ensuring developers of local governments' ability to accommodate development. On the whole, impact‐fee policy is a positive factor in the planning and development of urban areas.

The burden of development impact fees

Abstract This paper examines the incidence of development impact fees. The analysis shows how the burden created by the fees is passed forward to consumers in competitive markets. In constrained markets, a multiplier effect increases the amount that is shifted forward. Within demand driven or, ‘hot’ markets, the type of market many large and growing cities experience, the burdens are shifted back to developers, builders and landowners. Changing impact fee levies to reflect changing market conditions will increase housing prices by increasing uncertainty.

Critical Elements of Development Impact‐Fee Programs

Development impact fees have become a major source of new capital revenue for local governments. The need for new revenue is occasioned by declining federal public works funds, rising construction standards and costs, and increasing unwillingness of voters to pass tax increases. Communities thus look to new development to pay for its own way in part through impact fees. Impact fees are assessed to raise new revenue for the construction of a wide range of facilities. They are also being assessed by an increasingly large number of communities, some of which have no apparent growth problems. Soon, most communities of modest sophistication will assess impact fees. But courts require that impact fees be assessed in particular ways. This paper discusses the critical elements of defensible impact‐fee programs. It includes a review of policy issues, basic legal considerations, general procedures for identifying impacts and assessing impact fees, and principles of administration.