Quasi-Experimental Evidence on the Connection between Property Taxes and Residential Capital Investment | Zendy

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Quasi-Experimental Evidence on the Connection between Property Taxes and Residential Capital Investment

Author(s) -

Byron Lutz

Publication year - 2015

Publication title -

american economic journal economic policy

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 7.868

H-Index - 62

eISSN - 1945-7731

pISSN - 1945-774X

DOI - 10.1257/pol.20120017

Subject(s) - shock (circulatory) , economics , investment (military) , residential property , property tax , property (philosophy) , capital (architecture) , state (computer science) , public economics , monetary economics , tax reform , political science , economic geography , geography , law , medicine , philosophy , archaeology , epistemology , algorithm , politics , computer science

Do low property taxes attract new home construction? This question is answered using a large shock to property tax burdens caused by an unusual school finance reform in the state of New Hampshire. The estimates suggest that, in most of the state, communities with a reduced tax burden experience a substantial increase in residential construction. In the area of the state near the region's primary urban center (Boston), however, the shock clears through a price adjustment—i.e., by capitalizing into property values. The differing responses are attributed to differing housing supply elasticities. (JEL H71, H73, R31)

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