Property Tax Delinquency and Its Spillover Effects on Nearby Properties
28 Pages Posted: 9 Oct 2014
Date Written: October 7, 2014
This paper investigates the impact of property tax delinquency on the sales price of nearby residential properties, an effect that we call the “delinquency discount”. Using a unique data set from Chicago, we control for the duration of delinquency as well as the potential simultaneous relationship between property tax delinquency and home prices. We find the delinquency discount of one additional recently delinquent property within 660 feet is 3.4 percent on nearby housing prices. We also find that the effect of the delinquency discount increases with the duration of delinquency and decreases with distance from the sale. The results provide local governments with a more complete estimate of the cost of property tax delinquency. This is important as lawmakers weigh the benefits and costs of alternative policies.
Keywords: State and Local Taxation, Housing Supply and Markets, Property Tax Delinquency
JEL Classification: H71, R31
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