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Developers pay developer charges

Author

Listed:
  • Cameron K. Murray

    (School of Economics, The University of Queensland, St Lucia, Brisbane, Australia)

Abstract
Existing empirical studies of the price and quantity effects on new dwellings from developer charges (DCs), or impact fees, are limited by a lack of naturally occurring variation in the DC size. It is therefore difficult to isolate any behavioural effect from the mechanical relationship of DC and price arising from larger dwellings being levied with higher DCs. To overcome this problem we use data over a period incorporating a surprise policy change in Queensland, Australia, that introduced a cap on DCs which required them to be later changed, both upwards and downwards, for different dwelling types in different local council areas. Our model estimation shows that there are no measurable effects on price or quantity of new dwellings from DCs, supporting the practitioner's view of the charge being economically benign and fully incident on the landowner, even when the landowner is a property developer. When we instead include the baseline DC for each sale prior to the policy change, the problem of capturing only the mechanical effect arises once again, and model estimates using this baseline DC are similar to others studies that have instead claimed large behavioural price effects from DCs. The results are consistent with a real options view of the developer's economic situation.

Suggested Citation

  • Cameron K. Murray, 2016. "Developers pay developer charges," Discussion Papers Series 567, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uq2004:567
    as

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    File URL: https://economics.uq.edu.au/files/46170/567.pdf
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    References listed on IDEAS

    as
    1. Burge, Gregory & Ihlanfeldt, Keith, 2006. "Impact fees and single-family home construction," Journal of Urban Economics, Elsevier, vol. 60(2), pages 284-306, September.
    2. Stephen B. Billings & Thomas G. Thibodeau, 2013. "Financing Residential Development with Special Districts," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 41(1), pages 131-163, March.
    3. Ian Davidoff & Andrew Leigh, 2013. "How Do Stamp Duties Affect the Housing Market?," The Economic Record, The Economic Society of Australia, vol. 89(286), pages 396-410, September.
    4. Titman, Sheridan, 1985. "Urban Land Prices under Uncertainty," American Economic Review, American Economic Association, vol. 75(3), pages 505-514, June.
    5. Wing Hsieh & David Norman & David Orsmond, 2012. "Supply-side Issues in the Housing Sector," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 11-20, September.
    6. Shishir Mathur & Paul Waddell & Hilda Blanco, 2004. "The Effect of Impact Fees on the Price of New Single-family Housing," Urban Studies, Urban Studies Journal Limited, vol. 41(7), pages 1303-1312, June.
    7. Ihlanfeldt, Keith R. & Shaughnessy, Timothy M., 2004. "An empirical investigation of the effects of impact fees on housing and land markets," Regional Science and Urban Economics, Elsevier, vol. 34(6), pages 639-661, November.
    8. Burge, Gregory, 2014. "The capitalization effects of school, residential, and commercial impact fees on undeveloped land values," Regional Science and Urban Economics, Elsevier, vol. 44(C), pages 1-13.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Murray, Cameron, 2020. "A housing supply absorption rate equation," OSF Preprints 7n8rj, Center for Open Science.
    2. Murray, Cameron, 2019. "Marginal and average prices of land lots should not be equal: A critique of Glaeser and Gyourko’s method for identifying residential price effects of town planning regulations," OSF Preprints fnz7v, Center for Open Science.
    3. Murray, Cameron K., 2020. "Time is money: How landbanking constrains housing supply," Journal of Housing Economics, Elsevier, vol. 49(C).

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    More about this item

    Keywords

    Impact fees; developer charges; natural experiment;
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