Property Tax Policy and Housing Affordability

Abstract

We examine property tax reduction as a tool for increasing housing affordability. Analyzing various tax reduction policies through the lens of property tax incidence reveals a complex relationship between affordability and property taxes, with differential effects across demographic groups. Many policies often fail to improve affordability for young first-time homebuyers and renters, sometimes worsening affordability. We present a new nationwide atlas documenting the prevalence of local measures altering property tax burdens. Quasi-experimental evidence from Georgia’s homestead exemption valuation freezes suggests strong capitalization of assessment limits into home values, reinforcing that property tax relief may worsen affordability for first-time buyers. 

Keywords: property tax, incidence, housing affordability, assessment limits, homestead exemption

JEL Classification: H22, H71, R21, R31, R38