Saving Land Lowers Taxes

The Economic Benefits of Open Space and Your Local Tax Rate

by Robert Levite

Recent studies show, without exception, that residential development costs a town more money in terms of added services (schools, police, sewer and the like) than the property provides the town in real estate taxes. Although a community’s purchase of open space removes that property from the tax rolls, over a short period of time, the property surrounding the preserved property (not just the abutting property) grows in value. This increase in valuation runs from 6% or more in rural areas to as much as 40-50% in urban areas and the increased value can affect homes as far away as ½ mile from the preserved open space. Natural open space and trails in return are attractive to potential homebuyers, resulting in quicker turnover of these homes. Put this together with a study done for the real estate industry by American Lives, Inc., which found that the presence of quiet, open space, nature and bike trails and gardens were the essential characteristics that home buyers are looking for, and you have a winning combination.1

Two recent studies have analyzed the cost of community services in a number of towns in Massachusetts, Connecticut, New York, Rhode Island and Virginia. From these two studies, we can extract seven Massachusetts towns that were part of both studies. What we find is that, with respect to residential housing, for every $1.00 in tax money that a residence brings into a town, it cost the town, on average, $1.10 to provide services to that residence (in Connecticut, it costs $1.14 and in Rhode Island, it costs $1.20).2 In effect, residential property operates at a loss for the town. Once a piece of open space is developed into residential housing, the town is faced with increased costs that outpace the added taxes from the new housing. If preserved, the land raises home values, increasing the tax base without increasing the taxes.

Despite the fact that the removal of the open space from the tax rolls causes a small amount of a town’s taxes to be proportionately shared by the remaining properties, over a short period the increase in valuation of  properties near to the preserved land more than compensates for the loss of taxes when the property is removed from the tax rolls. Effectively, the preservation of open space slowly permits a community to stabilize its tax rate by lessening the new impacts and increasing the per-property value of existing properties.

Though many town residents look to commercial or industrial expansion as a panacea for this problem, towns must beware that they do not create their own trap. It is true that commercial/industrial properties, by themselves, do not drain a town from a tax perspective. However, new commercial and industrial development spurs residential growth, requires greater services for the population increase, requires greater infrastructure capabilities, increases traffic, crime, pollution and noise, and contributes to the loss of community character and rural identity. All the ramifications point to additional tax problems.

This scenario does not mean that a community should forego all residential development and buy up every piece of open space. It does mean that a community needs to balance its residential growth with a good mix of open space preservation and commercial/industrial expansion. This balancing requires proper planning and zoning, and can be done with a perspective that will allow communities to continue to grow while maintaining a stable tax rate. It requires that each community explore all available avenues to encourage responsible and fiscally prudent growth. The economic stability and, hence, the social stability of a community can be dependent upon this process.

1  ”Nation’s Housing – Quiet Communities, Open Natural Spaces Top Housing Draws”, San Francisco Chronicle, January 8, 1995

2  “Cost of Community Services in Southern New England”, Southern New England Forest Consortium, Inc. (conducted by Commonwealth Research Group, Inc.) Sept., 1995 and “Does Farmland Protection Pay?” American Farmland Trust, June, 1992.

Robert Levite is an environmental education specialist for U-Mass Extension and currently works with the Quinebaug-Shetucket National Heritage Corridor on land use issues. He also works as an environmental attorney concentrating on land and water resource protection, real estate and land use law. His office is in West Brookfield.  He can be reached at 508-831-1223, or via e-mail.