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Impact fees and real estate prices: evidence from 35 Chinese cities

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  • Dong, Xiaofang
  • Fu, Shihe
  • Yuan, Yufei

Abstract

Local governments often charge developers impact fees to finance local public goods. This has been practiced in Chinese cities for more than two decades; however, no empirical studies have tested the effect of impact fees on real estate prices. Using a panel data set for 35 large- and medium-sized cities from 1998 to 2008, we find that impact fees lead to a significant increase in real estate prices. For a given city, an increase in impact fees by one yuan leads to an increase of about 5 yuan in the price of newly-built housing; a 1% increase in impact fees leads to an increase of 5 percentage points in the housing price index and 7 percentage points in the land price index.

Suggested Citation

  • Dong, Xiaofang & Fu, Shihe & Yuan, Yufei, 2012. "Impact fees and real estate prices: evidence from 35 Chinese cities," MPRA Paper 48047, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:48047
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    References listed on IDEAS

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    1. Yinger, John, 1998. "The Incidence of Development Fees and Special Assessments," National Tax Journal, National Tax Association, vol. 51(n. 1), pages 23-41, March.
    2. 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.
    3. Jennifer S. Evans-Cowley & Fred A. Forgey & Ronald C. Rutherford, 2005. "The Effect of Development Impact Fees on Land Values," Growth and Change, Wiley Blackwell, vol. 36(1), pages 100-112.
    4. Ren, Yu & Xiong, Cong & Yuan, Yufei, 2012. "House price bubbles in China," China Economic Review, Elsevier, vol. 23(4), pages 786-800.
    5. Wang, Songtao & Yang, Zan & Liu, Hongyu, 2011. "Impact of urban economic openness on real estate prices: Evidence from thirty-five cities in China," China Economic Review, Elsevier, vol. 22(1), pages 42-54, March.
    6. Burge, Gregory & Ihlanfeldt, Keith, 2009. "Development impact fees and employment," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 54-62, January.
    7. Gyourko, Joseph, 1991. "Impact fees, exclusionary zoning, and the density of new development," Journal of Urban Economics, Elsevier, vol. 30(2), pages 242-256, September.
    8. Wu, Jing & Gyourko, Joseph & Deng, Yongheng, 2012. "Evaluating conditions in major Chinese housing markets," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 531-543.
    9. 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.
    10. Yinger, John, 1998. "The Incidence of Development Fees and Special Assessments," National Tax Journal, National Tax Association;National Tax Journal, vol. 51(1), pages 23-41, March.
    11. Ran Tao & Fubing Su & Mingxing Liu & Guangzhong Cao, 2010. "Land Leasing and Local Public Finance in China’s Regional Development: Evidence from Prefecture-level Cities," Urban Studies, Urban Studies Journal Limited, vol. 47(10), pages 2217-2236, September.
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    More about this item

    Keywords

    impact fee; real estate price; local public finance;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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