IDEAS home Printed from https://ideas.repec.org/p/mfg/wpaper/56.html
   My bibliography  Save this paper

Development Charges and Housing Affordability: A False Dichotomy?

Author

Listed:
  • Adam Found

    (University of Toronto)

Abstract

With the release of More Homes, More Choice: Ontario’s Housing Supply Action Plan in 2019, the Province of Ontario embarked on a campaign to reduce barriers to housing supply in an effort to make housing in the province more affordable. Among the various barriers identified in the report are municipal development charges, which are one-time levies on property development. Over the past 30 years, Ontario’s municipalities have increasingly relied on development charges to recover growth-related capital costs as provincial grants for expansionary capital works have declined. At the same time, the development industry has strongly opposed development charges while academics and policymakers have focused considerable attention on these charges. Concern over development charges principally stems from their supposed negative impact on housing affordability. The literature, however, provides little in the way of sound theoretical foundations or robust empirical evidence for such an effect. The present study aims to address that gap by examining the connection between development charges and housing affordability in a municipal context. By considering the way in which municipal services are provided and financed, this paper shows that properly formulated development charges in fact improve housing affordability.

Suggested Citation

  • Adam Found, 2021. "Development Charges and Housing Affordability: A False Dichotomy?," IMFG Papers 56, University of Toronto, Institute on Municipal Finance and Governance.
    • Handle: RePEc:mfg:wpaper:56
    as

    Download full text from publisher

    File URL: https://tspace.library.utoronto.ca/bitstream/1807/108068/1/imfgpaper_no56_developmentcharges_adamfound_november_9_2021.pdf
    File Function: First version, 2021
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Benjamin Dachis & Vincent Thivierge, 2018. "Through the Roof: The High Cost of Barriers to Building New Housing in Canadian Municipalities," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 513, May.
    2. Larry D. Singell & Jane H. Lillydahl, 1990. "An Empirical Examination of the Effect of Impact Fees on the Housing Market," Land Economics, University of Wisconsin Press, vol. 66(1), pages 82-92.
    3. Molloy, Raven, 2020. "The effect of housing supply regulation on housing affordability: A review," Regional Science and Urban Economics, Elsevier, vol. 80(C).
    4. Burge, Gregory & Ihlanfeldt, Keith, 2006. "Impact fees and single-family home construction," Journal of Urban Economics, Elsevier, vol. 60(2), pages 284-306, September.
    5. Edward Glaeser & Joseph Gyourko, 2018. "The Economic Implications of Housing Supply," Journal of Economic Perspectives, American Economic Association, vol. 32(1), pages 3-30, Winter.
    6. 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.
    7. 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.
    8. 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.
    9. Jonathan C. Levine, 1994. "Equity in Infrastructure Finance: When Are Impact Fees Justified?," Land Economics, University of Wisconsin Press, vol. 70(2), pages 210-222.
    10. Ihlanfeldt, Keith R., 2007. "The effect of land use regulation on housing and land prices," Journal of Urban Economics, Elsevier, vol. 61(3), pages 420-435, May.
    11. Harry Kitchen, 2017. "Paying for Water in Ontario's Cities: Past, Present, and Future," IMFG Papers 35, University of Toronto, Institute on Municipal Finance and Governance.
    12. 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.
    13. Ikeda, Sanford & Hamilton, Emily, 2015. "How Land-Use Regulation Undermines Affordable Housing," Annals of Computational Economics, George Mason University, Mercatus Center, November.
    14. Edward Ludwig Glaeser & Joseph Gyourko, 2003. "The impact of building restrictions on housing affordability," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 21-39.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Adam T. Jones, 2015. "Impact Fees and Employment Growth," Economic Development Quarterly, , vol. 29(4), pages 341-346, November.
    3. repec:wyi:journl:002181 is not listed on IDEAS
    4. Changhoon Jung & Chul-Young Roh & Younguck Kang, 2009. "Longitudinal Effects of Impact Fees and Special Assessments on the Level of Capital Spending, Taxes, and Long-Term Debt in American Cities," Public Finance Review, , vol. 37(5), pages 613-636, September.
    5. John Anderson, 2005. "Taxes and Fees as Forms of Land Use Regulation," The Journal of Real Estate Finance and Economics, Springer, vol. 31(4), pages 413-427, December.
    6. Adam Jones, 2015. "Fees and Firms: An Empirical Examination of the Relationship Between Development Impact Fees and Firms," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(2), pages 261-269, June.
    7. 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.
    8. Burge, Gregory & Ihlanfeldt, Keith, 2009. "Development impact fees and employment," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 54-62, January.
    9. Cheshire, Paul, 2009. "Urban land markets and policy failures," LSE Research Online Documents on Economics 30837, London School of Economics and Political Science, LSE Library.
    10. J. Peter Clinch & Eoin O'Neill, 2010. "Designing Development Planning Charges: Settlement Patterns, Cost Recovery and Public Facilities," Urban Studies, Urban Studies Journal Limited, vol. 47(10), pages 2149-2171, September.
    11. Howard, Greg & Liebersohn, Jack, 2021. "Why is the rent so darn high? The role of growing demand to live in housing-supply-inelastic cities," Journal of Urban Economics, Elsevier, vol. 124(C).
    12. Gyourko, Joseph & Molloy, Raven, 2015. "Regulation and Housing Supply," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1289-1337, Elsevier.
    13. Burge, Gregory & Ihlanfeldt, Keith, 2006. "Impact fees and single-family home construction," Journal of Urban Economics, Elsevier, vol. 60(2), pages 284-306, September.
    14. 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.
    15. Benjamin Dachis, 2018. "Hosing Homebuyers: Why Cities Should Not Pay for Water and Wastewater Infrastructure with Development Charges," e-briefs 281, C.D. Howe Institute.
    16. Lozano-Gracia, Nancy & Young, Cheryl & Lall, Somik V. & Vishwanath, Tara, 2013. "Leveraging land to enable urban transformation : lessons from global experience," Policy Research Working Paper Series 6312, The World Bank.
    17. Larson, William & Yezer, Anthony & Zhao, Weihua, 2022. "Urban planning policies and the cost of living in large cities," Regional Science and Urban Economics, Elsevier, vol. 96(C).
    18. Jenny Schuetz & Rachel Meltzer & Vicki Been, 2011. "Silver Bullet or Trojan Horse? The Effects of Inclusionary Zoning on Local Housing Markets in the United States," Urban Studies, Urban Studies Journal Limited, vol. 48(2), pages 297-329, February.
    19. Molloy, Raven, 2020. "The effect of housing supply regulation on housing affordability: A review," Regional Science and Urban Economics, Elsevier, vol. 80(C).
    20. Michael D. Eriksen & Anthony W. Orlando, 2022. "Returns to Scale in Residential Construction: The Marginal Impact of Building Height," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(2), pages 534-564, June.
    21. Jedwab, Remi & Barr, Jason & Brueckner, Jan K., 2022. "Cities Without Skylines: Worldwide Building-Height Gaps and their Possible Determinants and Implications," Journal of Urban Economics, Elsevier, vol. 132(C).

    More about this item

    Keywords

    development charges; housing; municipal finance; affordable housing; growth; impact fees;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mfg:wpaper:56. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Enid Slack (email available below). General contact details of provider: https://edirc.repec.org/data/imfutca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.