test, however, one-quarter or more of the burden of these fees could fall on
the owners of undeveloped land.
The analysis in this chapter also reveals that fees or negotiated charges on
developers for infrastructure that does not benefit new residents will only
increase the burden landowners bear. In addition, development fees generally
confer a small capital gain on existing homeowners and, to the extent that
housing construction is competitive, do not place any burden on developers.
Special assessments appear to provide a better way to ensure that the costs
of new infrastructure fall on the beneficiaries. Under the same assumptions
listed above, the burden of special assessments falls entirely on the people
who benefit, namely the people who buy new housing. Thus with wellfunctioning markets and sensible decisions about infrastructure investment,
special assessments avoid the problems of unfair burdens on landowners and
unfair gains to existing homeowners.
Finally, empirical research concerning the impact of development fees on
housing and land prices faces severe obstacles and so far has not yielded
clear-cut results. Although a few studies suggest that the implementation of
development fees to pay for new infrastructure raises housing prices, these
studies raise more questions than they answer. Given the growing popularity
of development fees, more empirical work is clearly needed.
TB may be a function of other locational variables too, such as school quality and access
to employment. These other variables are not relevant for our analysis and are ignored.
Recall that the present value of a long-lived and constant stream of annual benefits, B,
equals B/r, where r is the appropriate discount rate.
8. In practice, changes in P may lead to changes in H. This possibility has no impact on the
results presented here. See Yinger ( 1995). 9. Levine ( 1994) recognizes that the impact of infrastructure changes on house values is
tempered by property tax capitalization (with an equation equivalent to (11.2) above), but
he does not recognize the implications of this result for development fee incidence. 10.
The answer would be the same as the one given here if the extra revenue were used to
purchase better public services, which also would raise the value of all houses in the
12. Huffmanet al. ( 1988) say that development fees lead to a higher property tax base due to
higher housing prices. However, the cause of higher housing prices in their analysis is a
Questia, a part of Gale, Cengage Learning. www.questia.com
Book title: Local Government Tax and Land Use Policies in the United States:Understanding the Links.
Contributors: Helen F. Ladd - Author, Lincoln Institute of Land Policy - OrganizationName.
Publisher: Edward Elgar.
Place of publication: Cheltenham,UK.
Publication year: 1998.
Page number: 231.
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