There has been a great deal of news recently about the rising prices of housing in Massachusetts. There have been 380 articles in the past year on housing in the Boston Globe alone, according to Lexis-Nexis, and most of these discuss the lack of, construction of, or need for affordable housing units.1 One of the reasons cited for the increase in housing prices is the lack of construction of new housing units in all price ranges.

Virtually all new housing construction in Massachusetts is controlled and regulated at the local level. Within the confines of state law, municipalities have the right to adopt zoning and subdivision regulations as they see fit, and to issue or deny building permits and subdivision certifications. Recently, there have been some criticisms of how many municipalities in Massachusetts make these decisions, as they are seen as supporting efforts to curb development instead of regulate it more effectively. The major reasons used by municipalities to deny new construction within their borders are environmental protection, historic preservation, traffic control, and fiscal impact. The fiscal impacts of new development are an important factor for municipalities to consider, but these impacts are seen to greatly affect the development of affordable housing, where fiscal impact models are sometimes used as a basis for denying development rights based on the costs of the development to municipal services, especially school systems.

Because of this, the UMass Donahue Institute (UMDI) was asked by the Citizen’s Housing and Planning Association (CHAPA) to analyze the fiscal impact of housing on municipalities, including examining the assumptions that lie behind the models relied upon by many cities and towns. As the Per Capita Multiplier Method is the most common method used for fiscal impact analysis,2 this report concentrates on examining its accuracy and the underlying trends that would affect its ability to create reliable forecasts. We examined the methods used to forecast population in newly-constructed housing units and how well they work in practice. In addition, we examined trends in municipal expenditures and revenues for trends in municipal finance that could affect fiscal impact analysis. It is hoped that such an examination will make it easier for municipalities and developers to understand the real impacts of development and will create a more robust model of the effects of development on municipalities within Massachusetts.