Tax Increment Finance Investment Impacts on Localized Real Estate: Evidence from Chicago’s Multifamily Markets

Abstract

Indices for the Chicago multifamily real estate market are developed in order to examine the relationship between real property appreciation rates and proximity to a designated tax increment financing (TIF) district. Chicago is a community with a long history of TIF investment and a patchwork of more than 100 established TIF districts, comprising over 25 percent of the city’s total acreage and approximately 13.5 percent of the total tax base. Municipal governments across the country have come under increased pressure to provide quantifiable evidence that the tools they employ in the name of economic development have the potential to increase private investment. The central hypotheses assert that properties located within a designated TIF district will exhibit higher rates of appreciation after the area is designated a qualifying TIF district when compared to those properties selling outside TIF districts, and when compared to properties that sell within TIF district boundaries prior to designation.

Keywords: local tax policy, public finance, real estate markets, economic development