Who Benefits from Targeted Property Tax Relief? Evidence from Virginia Elections

41 Pages Posted: 16 Sep 2015 Last revised: 27 Apr 2016

See all articles by Jeremy Moulton

Jeremy Moulton

University of North Carolina, Chapel Hill - Dept. of Public Policy

Bennie D. Waller

Longwood University

Scott Wentland

Bureau of Economic Analysis (BEA)

Date Written: April 21, 2016

Abstract

This study examines the market impact of targeted property tax relief, which is critical for understanding who exactly benefits from a widely used local policy. Specifically, we investigate this in the context of two state-wide ballot measures in Virginia that provided property tax relief intended to aid seniors and disabled veterans. Using residential MLS microdata from Virginia, results from a regression discontinuity analysis show that once the 2010 tax relief measures passed on Election Day, property values rose sharply in response to the sudden increase in demand for homeownership among the targeted groups. As part of our identification strategy, we find that “senior preferred” housing as well as areas with higher proportions of seniors and veterans experienced the highest price appreciation, while areas with fewer veterans or seniors saw little impact. Further, we explore numerous alternative hypotheses and specifications that might explain this discontinuity. The findings suggest that this type of policy provides an immediate benefit to current homeowners, thereby offsetting benefits for subsequent homeowners within the targeted groups. This effect represents an unintended consequence of targeted property tax relief as a (very popular) policy tool more generally, as an immediate capitalization into home prices subsequently increases the cost of housing for many individuals the relief was intended to help.

Keywords: tax relief, elections, residential real estate, home prices, property tax, capitalization, housing policy

JEL Classification: H22, H71, R21, R28, R31, R51, D84

Suggested Citation

Moulton, Jeremy and Waller, Bennie D. and Wentland, Scott, Who Benefits from Targeted Property Tax Relief? Evidence from Virginia Elections (April 21, 2016). Available at SSRN: https://ssrn.com/abstract=2661002 or http://dx.doi.org/10.2139/ssrn.2661002

Jeremy Moulton

University of North Carolina, Chapel Hill - Dept. of Public Policy ( email )

Abernathy Hall
Chapel Hill, NC 27599-3435
United States

Bennie D. Waller

Longwood University ( email )

201 High Street
Farmville, VA 23909
United States
434-395-2046 (Phone)
434-395-2203 (Fax)

HOME PAGE: http://www.benniewaller.com

Scott Wentland (Contact Author)

Bureau of Economic Analysis (BEA) ( email )

1441 L Street NW
Washington, DC 20910
United States

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