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Do Local Property Taxes Affect New Building Development? Results from a Quasi-Natural Experiment in New Zealand

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  • Norman Gemmell

    (Victoria University of Wellington)

  • Arthur Grimes

    (Motu Economic and Public Policy Research, Victoria University of Wellington)

  • Mark Skidmore

    (Department of Agricultural, Food and Resource Economics, Michigan State University)

Abstract

We utilise a quasi-natural experiment in local property tax reform arising from a compulsory amalgamation of several local councils in 2010 in Auckland, New Zealand, to form a unitary local authority. The reform involved changes in property taxes (known as ‘Rates’ in New Zealand) including a shift in the local tax base from land-value to capital-value in some of the former councils; changes in relative levels of Rates across former councils; and changes in levels of a separate tax (Development Contributions) levied on new building. These exogenously imposed reforms enable us to test several hypotheses related to the effects on property development of these tax switches using a difference-in-difference approach, controlling for other influences. We find support for tax effects on building alterations but no evidence of effects on new building development after amalgamation. Our dataset covers only two post-amalgamation years, and we speculate that this apparent difference may arise from greater flexibility of building alterations to respond quickly compared with new developments.

Suggested Citation

  • Norman Gemmell & Arthur Grimes & Mark Skidmore, 2019. "Do Local Property Taxes Affect New Building Development? Results from a Quasi-Natural Experiment in New Zealand," The Journal of Real Estate Finance and Economics, Springer, vol. 58(2), pages 310-333, February.
    • Handle: RePEc:kap:jrefec:v:58:y:2019:i:2:d:10.1007_s11146-017-9651-y
    DOI: 10.1007/s11146-017-9651-y
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    References listed on IDEAS

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    Cited by:

    1. Miyazaki, Tomomi & Sato, Motohiro, 2022. "Property tax and farmland use in urban areas: Evidence from the reform in the early 1990s in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 63(C).
    2. Joshua M. Duke & TianHang Gao, 2023. "Land Value Taxation: A Spatially Explicit Economic Experiment with Endogenous Institutions," The Journal of Real Estate Finance and Economics, Springer, vol. 67(4), pages 673-694, November.
    3. MIYAZAKI Tomomi & SATO Motohiro, 2018. "Property Tax and Land Use: Evidence from the 1990s reforms in Japan," Discussion papers 18072, Research Institute of Economy, Trade and Industry (RIETI).
    4. Karolis Matikonis & Matthew Gobey, 2024. "Small Business Property Tax Reductions and Firm Productivity," Small Business Economics, Springer, vol. 62(1), pages 307-324, January.
    5. Robert A. Buckle & John Creedy & Norman Gemmell, 2020. "Is external research assessment associated with convergence or divergence of research quality across universities and disciplines? Evidence from the PBRF process in New Zealand," Applied Economics, Taylor & Francis Journals, vol. 52(36), pages 3919-3932, July.
    6. Murray, Cameron & Hermans, Jesse Benjamin, 2019. "Land value is a progressive and efficient property tax base: Evidence from Victoria," OSF Preprints mxg3j, Center for Open Science.

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