Property Tax Delinquency and Its Spillover Effects on Nearby Properties

28 Pages Posted: 9 Oct 2014

See all articles by James Alm

James Alm

Tulane University

Zack Hawley

Texas Christian University - Department of Economics

Jin Man Lee

DePaul University

Joshua Miller

National Association of Home Builders

Date Written: October 7, 2014

Abstract

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

Suggested Citation

Alm, James and Hawley, Zackary and Lee, Jin Man and Miller, Joshua, Property Tax Delinquency and Its Spillover Effects on Nearby Properties (October 7, 2014). Available at SSRN: https://ssrn.com/abstract=2507049 or http://dx.doi.org/10.2139/ssrn.2507049

James Alm

Tulane University ( email )

United States
5048628344 (Phone)

Zackary Hawley (Contact Author)

Texas Christian University - Department of Economics ( email )

Box 298510
Fort Worth, TX 76129
United States

Jin Man Lee

DePaul University ( email )

1 E Jackson Blvd
Chicago, IL 60604
United States

Joshua Miller

National Association of Home Builders ( email )

United States

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