Positive Influence of Impact‐Fee in Urban Planning and Development

Abstract

Policymakers seem to prefer that sellers of buildable land pay development impact fees in the form of lower land prices, or that builders pay those fees in the form of lower profits. Developers assert that home buyers will pay fees in higher prices. Who really pays the fees? The economic incidence of impact fees is investigated in Sarasota County, Florida. Regression analysis shows that impact fees are positively associated with residential urban land prices. Positive capitalization of impact fees in the urban land market may be due to: (1) Land buyers bidding up land value because impact fees to be paid in the future ensure extension of essential services, thus making land values rise by the expectations of facility extension; (2) the predictability of fee payment, usually through explicit fee schedules; and (3) all the planning and capital programming required to make impact fees legally defensible that has the ultimate effect of ensuring developers of local governments' ability to accommodate development. On the whole, impact‐fee policy is a positive factor in the planning and development of urban areas.