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Impact Fees and the Price of New Housing: An Empirical Study

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  • Charles J. Delaney
  • Marc T. Smith

Abstract

Development exactions in the form of impact fees are being used increasingly by local governments to fund the cost of providing public services necessitated by growth and development. This paper presents the results of an empirical study designed to ascertain the extent to which impact fees are capitalized into the price of new, single-family dwellings. On June 3, 1974, the city of Dunedin, located in Pinellas County, Florida, began assessing impact fees of $1,150 against all new, single-family construction. Using data on 5,839 new home sales in Dunedin and three other cities in Pinellas County from 1971-1982, it was found that builders were able to pass forward the total cost of impact fees to new home buyers. However, the price differential due to impact fees for new dwellings in Dunedin compared to the price of new dwellings in the other three cities disappeared after approximately six years. This is explained by the nature of the fee structure in Dunedin, adjustments in factor costs, increases in the price of housing in competing cities, and unrealized expectations regarding the benefits to be provided by impact fee collections. Copyright American Real Estate and Urban Economics Association.

Suggested Citation

  • Charles J. Delaney & Marc T. Smith, 1989. "Impact Fees and the Price of New Housing: An Empirical Study," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(1), pages 41-54.
  • Handle: RePEc:bla:reesec:v:17:y:1989:i:1:p:41-54
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    Cited by:

    1. Gunther Maier & Shanaka Herath, 2009. "Real Estate Market Efficiency: A Survey of Literature," ERES eres2009_155, European Real Estate Society (ERES).
    2. Skidmore, Mark, 2014. "Housing Affordability: Lessons from the United States," Working Paper Series 3422, Victoria University of Wellington, Chair in Public Finance.
    3. Randy Bluffstone & Matt Braman & Linda Fernandez & Tom Scott & Pei-Yi Lee, 2008. "Housing, Sprawl, And The Use Of Development Impact Fees: The Case Of The Inland Empire," Contemporary Economic Policy, Western Economic Association International, vol. 26(3), pages 433-447, July.
    4. McFarlane, Alastair, 1999. "Taxes, Fees, and Urban Development," Journal of Urban Economics, Elsevier, vol. 46(3), pages 416-436, November.
    5. Ihlanfeldt, Keith R. & Shaughnessy, Timothy M., 2004. "An empirical investigation of the effects of impact fees on housing and land markets," Regional Science and Urban Economics, Elsevier, vol. 34(6), pages 639-661, November.
    6. Burge, Gregory, 2014. "The capitalization effects of school, residential, and commercial impact fees on undeveloped land values," Regional Science and Urban Economics, Elsevier, vol. 44(C), pages 1-13.
    7. Brueckner, Jan K., 1997. "Infrastructure financing and urban development:: The economics of impact fees," Journal of Public Economics, Elsevier, vol. 66(3), pages 383-407, December.
    8. Racheva-Sarabian, Anna & Ryvkin, Dmitry & Semykina, Anastasia, 2015. "The default of special district financing: Evidence from California," Journal of Housing Economics, Elsevier, vol. 27(C), pages 37-48.

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