The effects of impact fees on housing investment.

An impact fee is a charge levied upon real estate developers to pay for infrastructure required by additional residents. The policy is a solution to the budget crises that may be experienced by governments of quickly growing communities. There is concern among public policy scholars that impact fees may have an adverse effect on the housing market. In this dissertation, I examine the effect of impact fees on the level of construction activity of residential property. In Chapter I, I present a review of the literature on impact fees from the fields of real estate, planning, and public finance. In Chapter II, I provide a theoretical analysis of the effects of the impact fee on the timing and density of development. In practice, the size of the impact fee may depend on the type of development, number of rooms, acreage, square footage, density of development, or service area. While the basis for the impact fee may appear arbitrary, the design appears to affect the nature of the developers' reactions. In the presence of Cobb-Douglas technology, a fee on density of development delays development but has no effect on density. A fee on capital has no effect on the timing of development but lowers the density of development. A fee on land delays development and increases the density of development. In Chapter III, I present a stock-adjustment model of the housing market that is used as a guide in developing an empirical model of the effects of impact fees on construction activity. In Chapter IV, I describe a cross-sectional, time series data set of the single-family housing market and impact fees in thirty Florida counties. In Chapter V, I apply a fixed-effects regression analysis to an event study of the effect of impact fees on building activity in Florida. I find that there is a significant speculative rush on single-family building permits prior to the imposition of the impact fee. However, there is a significant decrease in single-family housing starts after the imposition of the fee. This result is encouraging to planners who would like to use the impact fee to limit growth but disappointing for those who want to raise revenue without restricting growth.Ph.D.EconomicsSocial SciencesUrban planningUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/129715/2/9610196.pd