The Effects Of Impact Fees On Multifamily Housing Construction*

Abstract

Development impact fees may create more housing opportunities for lowerincome 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.

Impact fees and single-family home construction

“…7 These regulations increase the developer's costs of obtaining project approval. 8 For example, if single-family housing is seen as a free rider, less land may be zoned for single-family homes, increasing the likelihood that the developer must obtain a rezoning in order to build. Rezonings lengthen the project review process and increase the developer's compliance costs.…”

“…See Ihlanfeldt [15] for a review of the evidence on various forms of exclusionary land-use regulation. 8 We assume the residential land developer is also the homebuilder. Separating land development from homebuilding complicates the model without altering its main conclusions.…”

“…For some evidence on the effects that impact fees have on multifamily housing construction see Burge and Ihlanfeldt[8].…”

The political economy of housing in England

“…18. For example, Burge and Ihlanfeldt (2006) investigate the effect of impact fees (to finance public infrastructure) on the construction of new homes, drawing on data from Florida. They found that impact fees earmarked for public services other than water and sewer system improvements increased the construction of small homes within inner suburban areas and of medium and large homes within all suburban areas.…”

Regulation and Housing Supply

“…On the empirical side, Skidmore and Peddle (1998) find that residential development in DuPage County IL fell substantially after the imposition of an impact fee. By contrast, Ihlanfeldt (2006a and2006b) develop a model to show that impact fees can boost construction by substituting for exclusionary regulations and decreasing uncertainty about project approval. In a panel of counties in Florida, they document a positive relationship between construction of most types of suburban single-35 He finds a smaller effect of regulation on house prices when regulation is assumed to be exogenous, which is somewhat puzzling since most theories would suggest that regulation should be stronger in high-priced areas, biasing the estimated effect using OLS upwards.…”