Feeling the Impact of Impact Fees

Feeling the Impact of Impact Fees

by Cara Griffith

... While not front page news, impact fees are frequently used by local governments... But then again, it's not really a surprise that impact fees are so popular among local governments, as they are a relatively good means of financing infrastructure and they offer localities a viable means of financing the services necessary for the increased growth localities generally want to encourage. That is, growth brings new jobs, rising home values, and greater diversity of choices. All things localities want. But with growth comes the added need for local infrastructure and services...

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... [D]espite their benefits, impact fees are not without their problems. The most common complaint is that impact fees create a drag on the local economy. Developers object to impact fees on the ground that they have adverse effects on the housing market... [M]ost developers acknowledge that they pass the costs along to the homebuyer in the form of higher home prices. As a result, some fear that the burden of impact fees will be on low- and moderate-income homebuyers and will perhaps even price those buyers out of the market. Furthermore, impact fees are regressive in that they are applied uniformly as a fee rather than according to the property's value.

However, impact fees are a practical means of addressing fiscal shortfalls...

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View Cara Griffith's opinion in its entirety on the taxanalysts® Blog.

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