How do assessed values affect the transaction prices of homes?

Marcel Fischer, Patrick Hauf and Simon Stehle

No 293, arqus Discussion Papers in Quantitative Tax Research from arqus - Arbeitskreis Quantitative Steuerlehre

Abstract: Property taxes are commonly levied as a percentage of a home's assessed value (AV). AVs should affect home prices through two opposing channels. On the one hand, an unexpected increase in AV implies higher tax payments, which should hurt a home's selling price (tax channel). On the other hand, the increase should have a positive effect since AVs serve as reference prices (anchoring channel). In a quasi-experimental setting exploiting geographic variations in AV-publication dates and reassessment frequencies, we find that a higher AV leads to a lower transaction price, indicating that the tax channel prevails. Our results thus suggest an exacerbation of previously documented inequities caused by taxation.

Keywords: Assessed values; house prices; transaction prices; quasi-experiment; property taxation (search for similar items in EconPapers)
JEL-codes: G12 H20 R38 (search for similar items in EconPapers)
Date: 2023
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