Association for Public Policy Analysis & Management

The literature on the responsiveness of older homeowners to tax incentives with respect to migration is mixed. State level policies offering income tax breaks or lower state taxes on estates, inheritances and gifts have been found to have little effect on interstate migration for older homeowners (Conway and Rork 2012, Rork 2006). However, Shan (2010) found that higher property taxes do increase migration of older households, either to smaller houses or to lower-tax communities. In addition, Banzhaf et al. (2019) estimated that the senior property tax exemptions in Georgia do have an effect on county population composition, with those counties with an age-based property tax exemption experiencing higher rates of growth in its 65 and over population relative to the younger remainder of the county population.

In Banzhaf et al. (2019) the mechanism of this increased share is unknown. Do these exemptions encourage older people to migrate into these jurisdictions or do the older residents in the jurisdiction with the property tax exemption migrate out at a lower rate?

Also, little is known about the effects these exemptions have on the price of homes in the jurisdiction. It is possible that seniors value the exemption and bid up the prices of homes. It is also possible potential younger buyers that would not be eligible for the exemption, rationally foresee the taxes on property will rise due to the senior exemption making the property less valuable in the future. Due to these anticipated higher property taxes, these potential younger buyers may not value property in a jurisdiction with a senior homestead exemption as highly as they would the same property in a jurisdiction without the senior exemption.

We utilize several rich data sets to estimate these effects. First, using data from Core logic, Data quick and other sources we have created a data set that has several million observation from home sales for the 20 county metro Atlanta area from 2003 to 2017. The data set also includes related home characteristics such as square feet, number of bedrooms, bathrooms, etc., from recent tax assessor information. These data on home sales are merged with the Georgia voter file that covers all active and inactive voters at their last known address, using a fuzzy match protocol on the name of the homeowner and address of the property, to create a rich data set that includes estimates of the homeowner’s age and race.

We estimate the effects that senior homestead exemptions have on the migration patterns of various age and racial cohorts as well as the effect that these senior exemptions have on home values, using this rich data set for the metro Atlanta area. We utilize various statistical methods including differences and difference home value models with neighborhood fixed effects, probability modeling of the decision to sell a property, and synthetic control techniques.