Urban Structure and Development Taxes

Alastair McFarlane
1997 Social Science Research Network  
Taxing real estate developers is an attractive means of financing the cost of urban growth. However, development taxes may conflict with policy goals concerning land-use by distorting the behavior of developers. The goal of this paper is to analyze the effect of impact fees on the density and size of a city. Analyzing different fee designs, we find that: 1) an impact fee that taxes the output of housing delays development but has no effect on density; 2) an impact fee that taxes capital does
more » ... affect the timing of development but reduces density of development; 3) an impact fee that taxes land delays development and raises density; and 4) a fee on the sales value of the building does not affect the timing of development but lowers density. The effects of the development taxes are compared to those of general taxes (property tax, tax on rental income, and tax on consumers' income), in order to understand the likely effects on urban structure of a move toward development taxes to finance public services.
doi:10.2139/ssrn.15125 fatcat:tyorkfntzzcofezzjlirkvique