The Impact of Tax Increment Financing on Property Value

Publication Title

International Journal of Housing Markets and Analysis

ISSN

17538270

E-ISSN

17538289

Document Type

Article

Abstract

Purpose: Tax increment financing (TIF) has been adopted widely by municipalities to promote local economic development. This study aims to examine the effect of TIF adoption on property values at the parcel level in Indiana from 2009 to 2016. Design/methodology/approach: Concerns of TIF adoption endogeneity are addressed by a two-stage estimation process using urban population ratio and unemployment rates as instruments. Findings: In addition to finding influential socioeconomic and demographic factors, the results suggest that parcels located within TIF districts were sold more than parcels outside of TIF districts by approximately $5,000. Such premium is mainly picked up by the positive effect on commercial and agricultural parcels, which outweighs the negative TIF impact on residential types. Originality/value: Arm’s length transaction data on property value are used to eliminate the subjective assessment bias, potential calculation errors during the evaluation process and econometric issues caused by using the assessed value.

First Page

689

Last Page

711

Publication Date

9-19-2019

DOI

10.1108/IJHMA-05-2019-0049

Keywords

Housing, Housing markets, Housing policy, Housing taxation, Property value, Tax increment financing

Department

Department of Economics

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