Tax Limits and Housing Markets: Some Evidence at the State Level

36 Pages Posted: 14 Mar 2011

See all articles by William H. Hoyt

William H. Hoyt

University of Kentucky

Paul A. Coomes

University of Louisville - College of Business - Department of Economics

Amelia M. Biehl

University of Michigan at Flint

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Abstract

Property tax limitations, as well as other tax and expenditure restrictions on state and local governments in the United States, date back to the late 19th century. A surge in property tax limitation legislation occurred in the late 1970s and early 1980s, and its effects on government revenue, school financing and educational quality have been studied extensively. However, there is surprisingly little literature on how property tax limits affect housing markets. For the first time, we examine the impacts of property tax limitations on housing growth, in addition to their impacts on housing prices. Using state-level data over 23 years, we find that property tax limits increase housing prices (indexes) by approximately 2%. Property tax limits appear to have little impact on the growth in the housing stock, but education spending limits reduce the number of building permits by over 6%. Our indirect evidence suggests that the number of housing units may grow when property tax limits are accompanied by increases in other own-source revenues to state government.

Suggested Citation

Hoyt, William H. and Coomes, Paul A. and Biehl, Amelia M., Tax Limits and Housing Markets: Some Evidence at the State Level. Real Estate Economics, Vol. 39, No. 1, pp. 97-132, 2011, Available at SSRN: https://ssrn.com/abstract=1784096 or http://dx.doi.org/10.1111/j.1540-6229.2010.00288.x

William H. Hoyt (Contact Author)

University of Kentucky

Lexington, KY 40506
United States

Paul A. Coomes

University of Louisville - College of Business - Department of Economics ( email )

Louisville, KY 40292
United States

Amelia M. Biehl

University of Michigan at Flint

Flint, MI 48502
United States

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