Does Land Development Pay for Itself? A Critique of Cost-of-Community-Service Studies

18 Pages Posted: 26 Oct 2018

See all articles by John Estill

John Estill

San Jose State University - Department of Economics

Tom Means

San Jose State University - Department of Economics

Date Written: October 25, 2018

Abstract

Our paper addresses the fundamental belief of community planners that multifamily housing development does not pay for itself. This belief is based on flawed cost-of-community-service studies, produced and used mainly by urban planners. These studies fail to understand market responses to land use decisions, they violate basic assumptions necessary to compare projects using benefit-cost analysis, they fail to understand the distinction between private and public goods in allocating costs, and they rely on average instead of marginal costs to allocate costs of additional service levels. Multifamily housing projects will offer better returns when correct methods are employed to determine their relative merits. More importantly, better studies will help address the growing housing imbalance that is rewarding current homeowners at the expense of renters and new home buyers.

Keywords: cost of community service, fiscal impact analysis, fiscalization of land use

JEL Classification: H76, H72, R52, R58

Suggested Citation

Estill, John and Means, Tom, Does Land Development Pay for Itself? A Critique of Cost-of-Community-Service Studies (October 25, 2018). Mercatus Research Paper. Available at SSRN: https://ssrn.com/abstract=3273474 or http://dx.doi.org/10.2139/ssrn.3273474

John Estill (Contact Author)

San Jose State University - Department of Economics ( email )

San Jose, CA 95192
United States

Tom Means

San Jose State University - Department of Economics ( email )

San Jose, CA 95192
United States

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