AN EMPIRICAL-EXAMINATION OF THE EFFECT OF IMPACT FEES ON THE HOUSING-MARKET

In recent years a number of communities have simultaneously experienced population growth, deteriorating infrastructure, increased construction and maintenance costs, diminished local revenues, reductions in federal and state aid, voter unwillingness to pass bonds to serve new residents, reluctance of local officials to increase taxes, and emergent no-growth sentiments. The use of traditional revenue sources to pay for the infrastructure necessitated by growth has caused concern that new development is not paying its way. In this paper we are concerned with impact or development fees which have become increasingly popular with planners. While cities in Colorado, Florida and California have taken the lead in implementing impact fee systems, their use is spreading across the nation. The purpose of this paper is to provide an empirical analysis. Specifically, we evaluate the effect that the impact fee has on housing by estimating a reduced form equation for housing prices for a city in Colorado (Loveland) that introduced a cost recovery system in July 1984. We use cross-section data where the sample period includes an eighteen-month period on either side of the introduction of the expanded impact fee system. Before presenting our results, we develop the theoretical model upon which our empirical examination rests. The paper concludes with a discussion of the general applicability of our findings and the policy implications of our results. -from Authors