ERIC T. NAKAJIMA
Principal author

New mixed-income housing developments are not a big drain on public services, including schools, according to a new report.

The report, which was done by the University of Massachusetts Donahue Institute, challenges a key argument that local officials often use when opposing growth and new-home construction.

The study analyzed eight mixed-income homeownership developments in Brookline, Falmouth, Northampton, Peabody, Sandwich, Wellesley and Wilmington that were built within the last 17 years. The smallest has six homes and the largest has 86 units. None of the developments had any significant fiscal impact on municipal services, the report found. And their long-term fiscal impacts were similar to those of most neighboring properties.

“Most people assume that mixed-income developments perform differently in terms of fiscal impact [than other properties in their communities],” said Eric T. Nakajima, the report’s principal author and a senior research manager for the Donahue Institute.

The report, which was done for the Citizens’ Housing and Planning Association, also takes a look at how new housing is affecting school costs. Cash-strapped communities continually grapple with rising school costs as state aid has dwindled in recent years.

Nakajima said one striking finding in the report is that higher school costs are not tied to boosts in student enrollment. In fact, the report shows that school expenditures and staff levels increased in some communities even though student enrollment declined.

Of the eight developments analyzed, four showed a negative fiscal impact on their communities – meaning that property tax payments didn’t fully cover the municipal service costs – and three showed a positive impact. But Nakajima pointed out the impacts, whether positive or negative, were modest.

For example, in seven of the eight developments, the fiscal impact per unit ranged from a low of a $949 negative impact to a high of a $1,010 positive impact. Only one development, a 12-unit condominium complex in Wellesley, had an impact that diverged from that range.

Sherwood Forest, a 36-unit single-family home development in Sandwich that was built in 2002, generated $119,457 in total costs but only $85,292 in property tax revenue. Each homeowner in that development would have had to pay an additional $949 in property taxes in order to offset the negative fiscal impact.

In a similar fashion, people owning a condo in Wellesley’s Edgemoor Circle would have had to pay an additional $2,524 to cover actual municipal costs. The report, however, points out that Wellesley balances its expenditures because of the high value of many single-family homes within the community.

The town’s high home values are reflected in the gap between the median tax payment in Wellesley, $5,888, versus the average tax payment of $7,328. The report notes that the fiscal impact of Edgemoor Circle is similar to other condos and single-family homes in Wellesley.

In contrast to Edgemoor Circle and Sherwood Forest, Kendall Crescent, a 35-unit condo project in Brookline, generated $112,997 in total costs while contributing $148,359 in property taxes. In that development, each home contributed an extra $1,010 in tax payments.

Incredible Constraints
Most communities are concerned about whether they’re prepared to respond to the demand on services when a large development is proposed, said Judith Barrett, a planner with Community Opportunities Group, a Kingston-based firm that helps communities with community development planning issues.

Barrett, who spoke at a CHAPA forum last Thursday, said cities and towns are facing incredible constraints to raise revenues. “I can see why they worry about the fiscal impact of growth,” she said.

But Barrett, who has worked with Bay State communities to determine the fiscal impacts of growth, said it’s not easy to take one fiscal-impact formula and apply it to all communities, because they all operate differently.

Hopkinton Planning Director Elaine Lazarus said some communities understand the need for planning but they’re struggling with limited revenue. Therefore, too much emphasis is being places on the fiscal analysis instead of planning, she said.

In some cities and towns, local officials put the burden of paying for road maintenance, trash pickup and other costs on the homeowners in new developments. But Lazarus said ultimately that affects housing affordability.

“We shouldn’t expect or want every development to pay for itself,” Lazarus said.

In his report for CHAPA, Nakajima used a new formula called the fair-share impact method to measure a housing development’s impact on a community. The method calculates the difference between the cost of providing services per housing unit and the actual property taxes residents pay for the homes.

Most communities that are trying to determine the fiscal impact of a project use two different types of formulas. One formula estimates the number of people who will be living in a home and the demand on public services and compares it to the capacity of existing town infrastructure and services. The other, commonly referred to as the per-capita multiplier method, determines the impact by multiplying the average costs per person in a community by the estimated number of people who will be living in the home.

CHAPA Executive Director Aaron Gornstein called the per-capita multiplier method that towns use “bogus” and said communities should be presented with a different formula to determine actual costs.

“One of the primary arguments against proposed affordable housing developments is that they will be a drain on municipal budgets, especially regarding school costs,” Gornstein said in a press release. “This comprehensive study demonstrates that mixed-income homeownership developments on the whole are positive assets for the communities in which they are located.”