Who Benefits from Targeted Property Tax Relief? Evidence from Virginia Elections
41 Pages Posted: 16 Sep 2015 Last revised: 27 Apr 2016
Date Written: April 21, 2016
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: Suggested Citation