Local Government Tax and Land Use Policies in the United States: Understanding the Links

By Helen F. Ladd; Lincoln Institute of Land Policy | Go to book overview

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. 26

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.


NOTES
1.
Recent developments concerning development fees and special assessments are reviewed in Altshuler and Gömez-Ibéez ( 1993).
2.
See, for example, Huffmanet al. ( 1988), Altshuler and Gömez-Ibéez; ( 1993) and the references therein.
3.
The formal analysis can be found in Yinger ( 1995).
4.
For example, this chapter does not explore the impact of fees on the timing of development. For an analysis of this issue, see Downing and McCaleb ( 1987) and Nelsonet al. ( 1992).
5.
For reviews of this literature see Ross and Yinger ( 1995) and Yingeret al. ( 1988).
6.
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.
7.
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 jurisdiction.
11.
For details of these calculations, see Yinger ( 1995).
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

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Local Government Tax and Land Use Policies in the United States: Understanding the Links
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Figures vii
  • Tables viii
  • List of Contributors x
  • Acknowledgements xiii
  • Lincoln Institute of Land Policy xiv
  • 1. Introduction 1
  • Notes 21
  • References 21
  • Part I - Interactions Between Tax and Land Policies 23
  • 2. Theoretical Controversies: Land and Property Taxation 25
  • Notes 38
  • References 39
  • Notes 48
  • References 48
  • References 53
  • 3. Land Use Regulation as a Fiscal Tool 55
  • Notes 72
  • References 72
  • Notes 80
  • References 81
  • 4. Effects of Taxes on Economic Activity 82
  • Notes 99
  • References 99
  • Notes 107
  • Notes 115
  • 5. Tax Policies to Promote Economic Development 116
  • Notes 128
  • References 129
  • Part II - Tax Policy as a Land Use Tool 131
  • 6. the Pittsburgh Experience with Land- Value Taxation 133
  • Notes 141
  • References 142
  • 7. Property Tax Treatment of Farmland: Does Tax Relief Delay Land Development? 144
  • Notes 157
  • References 159
  • 8. Incentives, Firm Location Decisions and Regional Economic Performance 168
  • Notes 180
  • References 180
  • 9. Tax Increment Financing as a Tool of Redevelopment 182
  • Notes 196
  • References 197
  • Part III - Fiscal and Distributional Impacts 199
  • 10. Fiscal Impacts of Business Development in the Chicago Suburbs 201
  • Notes 212
  • References 214
  • Appendix 215
  • 11. Who Pays Development Fees? 218
  • Notes 231
  • References 233
  • 12. Regional Tax Base Sharing: the Twin Cities Experience 234
  • Notes 251
  • References 253
  • Index 255
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