The capitalization effects of school, residential, and commercial impact fees on undeveloped land values

• Development impact fees are found to influence the value of raw land.
• The capitalization effects of impact fees are nuanced.
• School fees asymmetrically affect residential and commercial parcels.
• Water/sewer fees only lower values for residentially zoned parcels.
• Local governments have meaningfully different education finance options.

Development impact fees are a controversial and relatively novel method of financing local public infrastructure. While their effects on home values have been examined extensively, very few studies have considered an important potential relationship with the price of undeveloped land. This study uses a 16 year panel of Florida property sales and impact fee rates to investigate the effects of various types of impact fee programs on the value of undeveloped residentially and commercially zoned parcels. Three main findings are obtained. First, school impact fee programs decrease the value of residentially zoned land but increase the value of commercially zoned parcels. Second, fees for water and sewer reduce the price of residentially zoned parcels but have no significant effect on commercially zoned land values. Finally, fees for other traditional categories like roads, police, and fire, seem to have stronger negative effects on commercially zoned land than on residentially zoned parcels.