The incidence of development fees and special assessments

This paper investigates the incidence of development fees and special assessments, popular ways to finance new public infrastructure. Development fees are often seen as a way to shift the burden of new infrastructure onto the new residents that require it. This view is only partially right. Even with mobile households, competitive housing markets, and infrastructure investments that meet a cost-benefit test, one-quarter of the burden could fall on the owners of undeveloped land. Moreover, imposing fees for infrastructure that does not benefit new residents will only increase landowners' burden. In contrast, the above conditions ensure that the burden of special assessments falls entirely on new residents.