Financing Residential Development with Special Districts

33 Pages Posted: 26 Feb 2013

See all articles by Stephen B. Billings

Stephen B. Billings

University of Colorado - Boulder

Thomas G. Thibodeau

University of Colorado at Boulder - Leeds School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: Spring 2013


This paper empirically examines the extent to which the property tax liability created by financing residential infrastructure using special district bonds is capitalized in house prices. We compare house prices for single‐family detached homes built within development districts to similar properties located outside development districts. Our hedonic specification includes the usual housing characteristics and controls for the influence of spatial attributes using Census Block Group “neighborhood” fixed effects. The preferred empirical specification restricts the data to neighborhoods that have numerous sales of recently constructed single‐family detached homes located both within and outside development districts. The empirical results indicate that house prices for homes located within development districts are lower than house prices for similar homes located outside of development districts, but the amount of property tax capitalization is significantly less than full. Results depend on our Generalized Methods of Moments estimator, which instruments property tax rates using the characteristics of development districts. We identify valid instruments by restricting transactions to properties located in rapidly growing suburban developments.

Suggested Citation

Billings, Stephen B. and Thibodeau, Thomas G., Financing Residential Development with Special Districts (Spring 2013). Real Estate Economics, Vol. 41, Issue 1, pp. 131-163, 2013, Available at SSRN: or

Stephen B. Billings (Contact Author)

University of Colorado - Boulder ( email )

Leeds School of Business
Koelbel Building
Boulder, CO US 80309
United States

Thomas G. Thibodeau

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

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