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The impact of positive property tax differentials on the timing of development

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  • Groves, Jeremy R.

Abstract

To date, few empirical studies have focused on the location decision by residential developers in response to changes in the property tax. Based on a dynamic time-to-development model by Turnbull, this paper finds, using 17Â years of parcel level data from Saint Louis County, Missouri, that higher than average tax rates increase the time-to-development for vacant parcels by between 4 and 11%, all else equal. Additionally this paper finds that the tax differential effect is cumulative, resulting in about a 20% increase in the time-to-development for the parcel facing the average number of years with a higher than average rate. These results support the analytical results by both Turnbull [Turnbull, G.K., 1988. The effects of local taxes and public services on residential development patterns. Journal of Regional Science, 28 (4), 541-562.] and McMillen [McMillen, D.P., 1990. The timing and duration of development tax rate increases. Journal of Urban Economics, 28, 1-18.] that the property tax can distort residential capital markets leading to inefficient urban growth, or sprawl.

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  • Groves, Jeremy R., 2009. "The impact of positive property tax differentials on the timing of development," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 739-748, November.
    • Handle: RePEc:eee:regeco:v:39:y:2009:i:6:p:739-748
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    Cited by:

    1. Lu, Chien-Lin & Liao, Wen-Chi & Peng, Chien-Wen, 2020. "Developers’ perspectives on timing to build: Evidence from microdata of land acquisition and development," Journal of Housing Economics, Elsevier, vol. 49(C).
    2. Mendonça, Rita & Roebeling, Peter & Martins, Filomena & Fidélis, Teresa & Teotónio, Carla & Alves, Henrique & Rocha, João, 2020. "Assessing economic instruments to steer urban residential sprawl, using a hedonic pricing simulation modelling approach," Land Use Policy, Elsevier, vol. 92(C).
    3. Barros, Carlos Pestana & Gil-Alana, Luis A. & Chen, Zhongfei, 2014. "The housing market in Beijing and delays in sales: A fractional polynomial survival model," Economic Modelling, Elsevier, vol. 42(C), pages 296-300.

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