Conventional fiscal impact analysis has failed to address adequately the spatial dimensions of development alternatives, notably the costs associated with housing density. This paper proposes a method that can correct this methodological shortcoming as well as determine, in budgetary terms, the optimal levels of housing density for various neighbourhoods. These optimal densities reflect the balance between the costs of land-related municipal services and the total property tax revenues in each neighbourhood. The enforcement of such optimal densities can help to eliminate the gap between taxation levels, which can recover land-related service costs, and the actual tax revenues in each neighbourhood. By linking planning to the budgetary process, planners can play a leading role in local decision-making. Local governments, for their part, can better comply with the need for budget restraint.
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