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Impact of Property Taxes and Public Education Outlays on Housing Costs: Recent Empirical Evidence

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  • Cebula, Richard

Abstract

This empirical study investigates the impact of property taxes, public education outlays, and other factors on interstate differentials in the cost of housing. While the literature on geographic cost-of-living differentials is well developed, the literature on geographic cost-of-housing differentials is much less so housing costs consist of the price of housing per se for owners (including maintenance and repairs) or rental payments per se for renters. Relevance of this research is elevated by the fact that the cost of housing is the main driver of cost-of-living differences between states. Ordinary least squares results imply that the cost of housing is positively a function of median family income, miles of shoreline, and the mean January temperature, and negatively a function of toxic waste releases and the presence of right-to-work laws. Finally, it is found that property taxes are capitalized into housing prices, thereby lowering those prices and the overall cost of housing, as it is narrowly defined, whereas there is modest evidence that public education outlays may also be capitalized into housing prices, thereby elevating the cost of house.

Suggested Citation

  • Cebula, Richard, 2007. "Impact of Property Taxes and Public Education Outlays on Housing Costs: Recent Empirical Evidence," MPRA Paper 60109, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:60109
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    References listed on IDEAS

    as
    1. Charlene M. Kalenkoski & Donald J. Lacombe, 2006. "Right-to-work Laws and Manufacturing Employment: The Importance of Spatial Dependence," Southern Economic Journal, John Wiley & Sons, vol. 73(2), pages 402-418, October.
    2. Nathan J. Ashby, 2007. "Economic Freedom and Migration Flows between U.S. States," Southern Economic Journal, John Wiley & Sons, vol. 73(3), pages 677-697, January.
    3. Cebula, Richard J., 1993. "The impact of living costs on geographic mobility," The Quarterly Review of Economics and Finance, Elsevier, vol. 33(1), pages 101-105.
    4. Walter W. McMahon, 1991. "Geographical Cost of Living Differences: An Update," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 426-450, September.
    5. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    6. Richard J. Cebula, 1978. "An Empirical Note on the Tiebout-Tullock Hypothesis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(4), pages 705-711.
    7. repec:rre:publsh:v:34:y:2004:i:1:p:112-19 is not listed on IDEAS
    8. Richard J. Cebula, 1989. "The Analysis of Geographic Living-Cost Differentials: A Brief Empirical Note," Land Economics, University of Wisconsin Press, vol. 65(1), pages 64-67.
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    More about this item

    Keywords

    housing cost; property tax capitalization; education outlay capitalization; income; climate; right-to-work laws;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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