Do low property taxes attract new home construction? This question is answered using a large shock to property tax burdens caused by an unusual school finance reform in the state of New Hampshire. The estimates suggest that, in most of the state, communities with a reduced tax burden experience a substantial increase in residential construction. In the area of the state near the region's primary urban center (Boston), however, the shock clears through a price adjustment—i.e., by capitalizing into property values. The differing responses are attributed to differing housing supply elasticities. (JEL H71, H73, R31)
"Quasi-Experimental Evidence on the Connection between Property Taxes and Residential Capital Investment."
American Economic Journal: Economic Policy,
State and Local Taxation, Subsidies, and Revenue
State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
Housing Supply and Markets