Report title: The Costs and Hidden Benefits of New Housing Development in Massachusetts

Author(s): Michael Goodman, Elise Korejwa, Jason Wright

Report date: March 2016

Sponsor: Massachusetts Housing Partnership

Issue areas: Housing policy; economic impact analysis; education finance;

Summary & key findings: Frequently, local opposition to new housing development is based on fiscal concerns. Previous research (Nakosteen et al., 2003; Nakajima et al., 2007; Burnet et al., 2012) has found that these concerns are frequently misplaced since they assume that the additional expenses will be equal to per capita local cost associated with new residents, particularly the costs associated with K-12 education, rather than the marginal cost. This working paper builds upon this work by revisiting six of the eight communities examined by Nakajima et al. (2007) and examining whether the state fiscal impacts of new housing development are large enough to offset negative local fiscal impacts when they do occur. Our analysis of these six cases finds that, in the aggregate, the six new developments generated considerably more state tax revenue than any actual local revenue shortfalls. Overall, we find that only 31 percent of the net new state tax revenue generated by the developments would be needed to completely offset the negative fiscal impacts experienced by three of the six communities. This suggests that the positive state fiscal benefits of new housing development are more than sufficient to support a state fund to guarantee that communities will be made financially whole in the event they allow the development of housing that meets regional and statewide needs, but find themselves fiscally disadvantaged as a result. These findings also imply that more thoughtful and evidence-based local and regional planning could minimize the chance of negative local fiscal outcomes associated with new housing development.

Report link:  Access the report here.