ABSTRACT
How do impact fees affect the price of starter homes in comparison to larger homes? What effect, if any, do impact fees have on the supply of new homes of different sizes that get built within urban housing markets? Do impact fees disproportionately burden lower income households and lead to increased racial segregation? These questions are of critical importance and yet there is widespread disagreement among policy makers and scholars concerning their answers. Opponents of impact fees claim they lead to higher prices, lower construction levels, and that impact fees disproportionately burden lower income groups. Advocates of impact fees claim just the opposite. Scholars have suggested that impact fees may temper exclusionary zoning and other types of exclusionary regulations, allowing more low income housing to be built within suburban areas. This dissertation provides clear evidence that impact fees help create more housing opportunities for lower income households within suburban areas by reducing the fiscal incentive behind the adoption of exclusionary land use regulations.
Using a unique panel data set of historical county level impact fees in Florida spanning the years 1993 to 2003, $1 of non-water/sewer impact fees is found to raise the price of small, medium, and large homes by $0.39, $0.82, and $1.28, respectively. These effects are consistent with the idea that impact fees raise housing prices primarily though an increase in demand rather than by restricting supply. The results also show that non-water/sewer impact fees increase the construction of small homes within inner suburban areas and of medium and large homes within all suburban areas. Non-water/sewer impact fees are also found to expand the stock of multifamily housing within inner suburban areas. Collectively, these findings lead to an important policy implication- by decreasing the fiscal deficit imposed on existing residents, impact fees may lead to a significant increase in the number of affordable residential opportunities available within inner suburban areas. These results contradict conventional wisdom and suggest that impact fees may be a socially desirable alternative to other types of exclusionary regulations that local governments are likely to implement (and stringently enforce) in their absence.
