Can Development Impact Fees Help Mitigate Urban Sprawl?

Abstract

Problem, research strategy, and findings: Local governments often react to sprawl by adopting urban containment policies to limit fringe growth and encourage core development. An alternative is to design impact fee programs accounting for the higher costs of providing services to remote locations. Zone-based impact fee programs carry this potential, but there is no empirical work investigating their effect on residential development. We explored the effects of a zone-based impact fee program on residential permits issued across the Albuquerque, NM, metropolitan statistical area using 21 years of data, identifying countervailing influences on density. The program mitigated sprawl by reducing the share of construction occurring near the urban fringe and by increasing the share in more centrally located areas, but there is no evidence the program increased core development. During a brief period when Albuquerque had impact fees but an adjacent community did not, we observed spillover effects that exacerbated sprawl.

Takeaway for practice: Planners managing sprawl can use zone-based impact fee programs that account for the higher costs of fringe development to effectively increase the density of residential construction, but it may be necessary to use regional programs or coordinated efforts to prevent spillover to adjacent communities.

Keywords:

• urban sprawl
• infill
• impact fees
• residential permits

Acknowledgments

About the authors: Gregory S. Burge ([email protected]) is an associate professor in the Department of Economics at the University of Oklahoma. Trey L. Trosper ([email protected]) is a doctoral candidate in the Department of Economics at the University of Oklahoma. Arthur C. Nelson ([email protected]) is the Presidential Professor of City & Metropolitan Planning at the University of Utah. Julian C. Juergensmeyer ([email protected]) is a professor and Ben F. Johnson Jr. Chair in Law at Georgia State University. James C. Nicholas ([email protected]) is emeritus professor of law and urban and regional planning at the University of Florida.

Notes

1. We thank the City of Albuquerque and its planning department for giving us the information we used to construct Figure 1, as well as the permit data shown in Figure 2.

2. Three of the authors (A. C. Nelson, J. C. Juergensmeyer, and J. C. Nicholas) helped design the program.

3. Prior to 2006, the city charged only one-third of the eventual rates. During 2006, this increased to two-thirds. The highest rates took effect January 1, 2007, and remained in place for the next 33 months. Finally, in October of 2009, rates were halved and remained at that level through the end of our data. After we collected our data, Albuquerque modified its impact fee program again. The modifications adopted in November of 2012 are (to our knowledge) still in place. For the most part, they replaced the zone-based marginal cost pricing approach with the more commonly seen average-cost pricing approach.

4. Been (2005) synthesized this complex relationship in her research.

5. Certain components of the impact fees levied on an individual permit were based on the interior square footage of the structure or the size of the lot. However, Albuquerque's permit data did not reflect these individual traits. We calculated impact fee rates using a standardized property of 1,000 square feet and a fifth of an acre lot. We came to this decision after considering several alternative sizes. While 1,000 square feet is an admittedly small figure, the use of larger sizes only magnified the eventually estimated gap between the effect of impact fees in the fringe zone relative to the estimated effect in the core and interior zones. Since the relationship between Albuquerque's program and the density of development was our primary interest, we viewed this as an appropriately conservative choice.

6. Rio Rancho represents the only other active permitting area in the region. While unincorporated portions of Bernalillo County surround Albuquerque, our data revealed only 93 residential building permits were issued in the unincorporated area during our sample (compared with more than 35,000 within the city).

7. Impact fees were defined as comparable if they fell within 5% of one another.