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- Economic and Fiscal Impact Analysis
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Real estate developers often think of an economic impact analysis as a regulatory checkbox only useful for zoning approvals or incentive negotiations. But a well-executed study may deliver hidden returns on investment (ROI) that go far beyond permitting.
From better financing to reduced litigation risk, an economic impact analysis can meaningfully improve a project’s financial and strategic outcomes in the following ways.
1. Better Financing Terms
Lenders and investors are increasingly sophisticated in evaluating project risk. A professional impact analysis offers third-party validation of a project’s economic viability, employment creation, and demand projections, strengthening underwriting packages.
Camoin Associates’ clients have reported measurable improvements in loan terms when a robust economic impact analysis has been included in their financing applications.
2. Reduced Litigation Risk
Community resistance and lawsuits can delay or derail projects. High-quality economic analysis addresses these barriers by demonstrating net community benefits in clear, quantifiable terms.
A 2019 study conducted by the Administrative Conference of the United States, which interviewed economists and non-economists in regulatory agencies, found that the majority of the respondents believed better economic analysis reduces litigation risk, while weak or absent analysis leaves projects more vulnerable to legal challenge.
3. Enhanced Investor Relations
Equity partners, community development financial institutions (CDFIs), and municipal financing authorities expect credible data on job creation, wages, and long-term economic benefits. An economic impact analysis provides the hard numbers that these sophisticated investors require.
Global firms like S&P explicitly note that economic impact analysis is critical to demonstrating project value and resilience to investors and stakeholders.
4. Market Intelligence Gathering
Commissioning an economic impact analysis is not only about reporting outputs; it’s also an opportunity to collect and analyze valuable market intelligence on demand, demographics, competitive projects, and supply chains.
This process often highlights risks and opportunities that developers might otherwise overlook, leading to better sizing, phasing, or mix of uses. Economic development advisors, including Camoin Associates and the US Small Business Administration, emphasize that market intelligence reduces risk and strengthens project strategy.
5. Technology Is Making Impact Analysis More Accessible
Professional-level economic impact analysis is continuing to become much more accessible thanks to advances in technology and data innovation.
The biggest game-changer has been increased access to sophisticated modeling software like IMPLAN, Lightcast, RIMS II, etc., which have put rigorous economic modeling tools within reach of far more organizations.
At the same time, economic and demographic data that were once costly and time-consuming to obtain are now more widely available and easier to use, significantly reducing both the cost and timeline of baseline analysis.
Additionally, streamlined reporting through interactive dashboards and visualization tools has made it possible to present complex results in ways that actually make sense to municipal officials, investors, and community members alike.
As a result, comprehensive economic impact analyses that used to take months to develop and required substantial budgets can now be completed faster and more affordably, without sacrificing the analytical rigor that stakeholders need for sound decision-making.
When to Invest in Economic Impact Analysis
Not every project requires the same level of analysis, but here are the situations where professional impact analysis consistently delivers strong returns:
- Projects seeking public financing or incentives. If a project requires tax credits, grants, or other public support, impact analysis is often required, and even when it’s not, it can still significantly strengthen a developer’s application.
- Developments in communities with affordable housing requirements. Impact analysis can quantify how a project addresses community needs and justifies increased density allowances or other approval concessions.
- Mixed-use and large-scale projects. The more complex the project, the more important it is to clearly communicate the economic benefits and proactively address potential community concerns.
- Projects in markets with strong community engagement. If the development is occurring in a community with active neighborhood associations or vocal opposition to development, impact analysis provides objective data that can help shift conversations from emotion to facts.
The Key to Unlocking Economic Impact Analysis ROI
While technology has improved accessibility, the real value of economic impact analysis lies in combining technical expertise in economic modeling with a practical understanding of municipal processes.
The most effective analyses are those that not only quantify impact but also anticipate the concerns of lenders, regulators, and communities and communicate results in a clear, compelling way. For developers, this means an economic impact analysis is not just a regulatory exercise, but a strategic investment which can result in measurable ROIs in financing, approvals, investor confidence, and risk management.
About the Author
Dawn Hammond is an Economic Data and Research Analyst for Camoin Associates. She conducts in-depth research and data analysis to uncover economic and market trends and examines the economic and fiscal impacts of real estate development and other projects for clients across the country.
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