Municipal Service Pricing

Impact on the Spatial Location of Residential Development

by David M. De Ferranti, Carole Chew, Isao Kobashi, Elizabeth S. Rolph, J. Webb

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One in a series of reports on the impact of municipal service pricing policies on urban structure and finance. The purpose of R-1878/4 is to examine the effectiveness of alternative pricing policies in deterring noncontiguous or "leapfrog" residential development. Will a service pricing policy which causes fees and charges collected on new residential construction to be higher for leapfrog projects than for projects contiguous with previously developed areas induce a shift in the spatial distribution of growth within the municipality toward a more compact pattern of expansion? Theoretical considerations and some recent empirical evidence are discussed, and results are given from a simulation analysis based on data from a recent developer survey in Santa Clara County, California. The analysis demonstrates that the impact on locational patterns of a tax on leapfrogging may be highly sensitive to the size of the tax, the degree to which it can be passed on to the home-buyer, and land value adjustments. (See also R-1878/1, R-1878/2, R-1878/3.)

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