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The Effect of Development Impact Fees on Land Values

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  • JENNIFER S. EVANS‐COWLEY
  • FRED A. FORGEY
  • RONALD C. RUTHERFORD

Abstract

ABSTRACT This paper presents an empirical analysis of the effect of impact fees on the value of land used in residential development. A random effects model is estimated to examine the relationship between impact fees and land values using forty‐three Texas cities that impose impact fees. Prior research suggests that higher impact fees result in higher lot values, and the results of this research support this suggestion. Results indicate that for each $1,000 increase in impact fees, lot values increase by 1.3 percent. Additionally, these results suggest that developers are able to pass a small amount of the impact fee to the owners of developable land. However, for undeveloped land the results are mixed. For each $1,000 in assessed impact fees, undeveloped land values decrease by 0.042 percent. These results support prior evidence that suggests home buyers may ultimately bear the majority of the cost of impact fees.

Suggested Citation

  • 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, February.
    • Handle: RePEc:bla:growch:v:36:y:2005:i:1:p:100-112
    DOI: 10.1111/j.1468-2257.2005.00268.x
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    Cited by:

    1. McAllister, Pat & Shepherd, Edward & Wyatt, Peter, 2018. "Policy shifts, developer contributions and land value capture in London 2005–2017," Land Use Policy, Elsevier, vol. 78(C), pages 316-326.
    2. repec:wyi:journl:002181 is not listed on IDEAS
    3. Adam T. Jones, 2015. "Impact Fees and Employment Growth," Economic Development Quarterly, , vol. 29(4), pages 341-346, November.
    4. Xiaofang Dong & Shihe Fu & Yufei Yuan, 2013. "Impact Fees and Real Estate Prices: Evidence from 35 Chinese Cities," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 8(2), pages 207-219, June.
    5. Elizabeth Jean Taylor, 2016. "Urban Growth Boundaries and Betterment: Rent-Seeking by Landowners on Melbourne's Expanding Urban Fringe," Growth and Change, Wiley Blackwell, vol. 47(2), pages 259-275, June.
    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.

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