Urban Impacts of Liquid Markets: Water and New Housing in Colorado

- | McNeil Building 414 (Urban Studies Conference Room)
Benji Smith

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Speaker: Benji Smith, Applied Economics

Discussant: Dr. Alison Lassiter, City and Regional Planning

Abstract: A growing class of local land use regulations stem from water scarcity; this paper seeks to measure their impact on new housing construction, house prices, urban form, and water use. I do so by studying water impact fees (WIFs), a growing part of these land use regulations. Using new data on WIFs in the Front Range of Colorado, I show that WIFs have increased at over three times the rate of inflation over the past two decades to nearly $25,000 for an average house, and that the pricing regime of these impact fees has moved from a flat per-unit basis to a variable pricing regime which varies by estimated future water usage. I investigate the effects of WIFs using the staggered adoption of variable pricing regimes and find that they are causing developers to build on smaller lots, with stronger effects in areas with larger lots before the policy and larger impacts more than 5 years after the policy comes into place. Using remotely-sensed data on lot-specific landscaping, I also provide evidence that these policies reduce outdoor water use. To explain these findings, I develop a model of new housing supply with endogenous choice of lot size and housing quality which predicts developers will build on smaller lots and build lower quality housing. I plan to use this model to estimate the capitalization of water impact fees into house prices and the extent to which impact fee policies can lower regional outdoor water use. 

Please contact Tessa Huttenlocher (thutten@sas.upenn.edu) with any questions.

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