Capitalization of Property Tax Incentives: Evidence From Philadelphia

Jonah Coste ()

No 24-01, FHFA Staff Working Papers from Federal Housing Finance Agency

Abstract: In 2000, Philadelphia enacted an abatement policy that exempted new development from property taxes for 10 years. This policy provides an ideal natural experiment to test property tax capitalization because it creates contemporaneous intra-jurisdiction tax variation within a finite and known duration. Consistent with theory, the tax benefits are initially capitalized fully into home prices. However, as abatements near expiration, the benefits become overcapitalized in home prices. This paper also finds that escrow payment shocks cause delinquencies for owners of homes with expiring abatements.

Keywords: housing; tax incentive; property tax; real estate; mortgages; payment shock (search for similar items in EconPapers)
JEL-codes: D12 G41 G51 H71 R21 R31 R38 R51 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2024-01
New Economics Papers: this item is included in nep-pbe, nep-pub and nep-ure
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Citations:

Forthcoming in Real Estate Economics

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