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Report: Revenues could support fund for communities that OK housing

Posted on March 15, 2016

BOSTON, March 15, 2016 --- A new in-depth study of a sample of Massachusetts housing developments finds that the state tax payments made by their residents more than offset any negative local fiscal impacts associated with these developments.

Download the study

Prepared by the Public Policy Center (PPC) at UMass Dartmouth, the study revisits six mixed-income developments examined in a 2007 UMass Donahue Institute (UMDI) study and uses a statistical model to estimate the state tax impacts of the residents of the developments who are new to the state.

Listen to an interview with study's principal author, Michael Goodman, on WBUR

While the 2007 UMDI study found that municipal service costs exceeded municipal tax receipts in three of the six developments, the new PPC study finds that these net costs represent less than one third (31 percent) of new state tax revenues associated with these developments.

This suggests that state tax revenues from new housing are large enough to compensate communities for the negative local fiscal impacts of new housing.

“Overall our findings suggest that the net new state tax revenue generated by local mixed-income housing offsets any net negative fiscal burdens to communities,” said UMass Professor Michael Goodman, executive director of the PPC and one of the report’s authors. “A state policy that dedicated a portion of this revenue to communities could alleviate some of the hesitancy to permit new housing developments in response to market demands.”

In addition, the study finds that:

  • School district enrollment capacity matters. The ability of a district to add more students without hiring additional teachers or increasing class size has a significant effect on district expenditures. On average, a 1 percent increase in enrollment in districts without capacity is associated with a 0.91 percent increase in expenditures. On average, a 1 percent increase in enrollment in districts with excess capacity is associated with a 0.65 percent increase in expenditures.
  • Better planning could reduce the chance of negative financial impacts. The report contains a series of demographic multipliers describing the average number of school age children by unit type and unit value designed to be use as a planning tool.

The PPC study was commissioned by the Massachusetts Housing Partnership (MHP), a public non-profit agency that supports and finances affordable housing. MHP commissioned it as part of its ongoing “Unlock the Commonwealth” initiative, which is dedicated to recommending growth policies to help the Commonwealth better respond to housing demand so it can realize its full economic potential.

“The PPC study illustrates that new housing developments have a positive fiscal impact on the Commonwealth overall and that community resistance to housing development results in a lost opportunity to generate new state revenue,” said Clark Ziegler, MHP’s executive director. “The suggestion that state revenues from new housing are enough to fully compensate for local fiscal impacts would help address one of the arguments that communities make when resisting new housing developments.”