Can development impact fees help mitigate urban sprawl?

Problem, research strategy, and findings: Local governments often react to sprawl by adopting urban containment policies to limit fringe growth and encourage core development. An alternative is to design impact fee programs accounting for the higher costs of providing services to remote locations. Zone-based impact fee programs carry this potential, but there is no empirical work investigating their effect on residential development. We explored the effects of a zone-based impact fee program on residential permits issued across the Albuquerque, NM, metropolitan statistical area using 21 years of data, identifying countervailing influences on density. The program mitigated sprawl by reducing the share of construction occurring near the urban fringe and by increasing the share in more centrally located areas, but there is no evidence the program increased core development. During a brief period when Albuquerque had impact fees but an adjacent community did not, we observed spillover effects that exacerbated sprawl. Takeaway for practice: Planners managing sprawl can use zone-based impact fee programs that account for the higher costs of fringe development to effectively increase the density of residential construction, but it may be necessary to use regional programs or coordinated efforts to prevent spillover to adjacent communities.