Impact Fees Linked to Rising Home Costs
Brett M. Baden and Don L. Coursey

In their Harris School working paper, "An Examination of the Effects of Impact Fees on Chicago's Suburbs," University of Chicago researchers Brett M. Baden and Don L. Coursey find that municipal impact fees had a substantial influence on the prices of single-family homes in eight Chicago suburbs between 1995 and 1997. Impact fees are one-time charges imposed by municipalities on residential builders to recover part of the costs of infrastructure improvements necessary for expanded development. Municipal planners use these fees to force developers and new homebuyers to pay for their marginal impact upon municipal services, e.g., new schools, sewers, roads, parks, and other public amenities. Baden and Coursey note that developers respond to such fees by building less housing, building in areas less suited to commuting patters and community planning, and by building larger and more expensive homes. Moreover, the researchers observe that this trend may price low and middle-income families out of the suburban housing market, since developers are encouraged to build higher-priced homes in order to recover the fees through higher margins. Read more >>