The University of Massachusetts Amherst

UMass Donahue Institute

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UMass Donahue Institute conducts study of fiscal impact measures of housing development

The UMass Donahue Institute performed a study for the Citizen's Housing and Planning Association (CHAPA) on how municipalities measure the fiscal impact of housing development. This study took over six months to complete and utilized both Donahue staff and tenured UMass faculty.

The study found that one of the most common methods for measuring the fiscal impact of housing, the Per Capita Multiplier Method, did not do a good job in predicting the impact of new development. In addition, the population forecasting model used to estimate the number of new residents that would occupy newly-constructed housing was also found to be flawed and in many cases would overestimate the number of new residents. The study also found that there was little relationship between population growth and the growth in municipal expenditures. In fact, there was evidence that population growth helped to control the rise in per-capita municipal expenditures.

The study explored the secondary benefits and impacts of housing development that are not captured in any standard model. While new households add to the economy with their consumer spending power, state income and sales taxes, and contributions to the workforce and economic development, these factors are not considered in fiscal impact models. In addition, the social capital created by new households that keeps communities healthy and vibrant is also not considered.

Finally, the study reviewed research on growth patterns and land use in Massachusetts and found that a great deal of land is being used to build a small amount of new housing. The concept of "smart growth" was examined along with its ability to reduce certain municipal costs through more efficient development.

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UMass Donahue Institute

University of Massachusetts Amherst

100 Venture Way, Suite 9

Hadley, Massachusetts 01035

(413) 545-0001

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