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

Byron Lutz

American Economic Journal: Economic Policy, 2015, vol. 7, issue 1, 300-330

Abstract: 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)

JEL-codes: H71 H73 R31 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/pol.20120017
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