Association for Public Policy Analysis & Management

A common argument in property tax policy debates is that rising property taxes leads to involuntarily displacement of residents, with more liquidity constrained residents, such as the elderly, often argued to be the most vulnerable. Despite the ubiquity of this popular sentiment, surprisingly little analytic work has been brought to bear on the matter. Martin and Beck (2018) provide what might be the only published study, at the time of writing, that directly considers the involuntary displacement effect of property taxes. Using the Panel Study of Income Dynamics and variation in property tax limits across states, they provide evidence that the property tax has a positive but trivially small impact on involuntary residential moves.

We build off this work with data and econometric improvements. We search for the involuntary displacement effects of property taxes by estimating and comparing survival functions for homes receiving a temporary and decreasing property tax abatement to similar homes that do not receive the reduction. The event in question is a resale with time to resale as the response. While both groups experience increasing property taxes over time, due to the declining tax savings experienced by homes with abatements, the magnitude of the increase is considerably larger for them than for the unabated homes. We test the null that survival functions are statistically different from zero between the two groups. Failing to reject the null would indicate that larger property tax increases do not impact time to resale any differently than smaller property tax increases, thus undermining the argument that increasing property taxes force residents to involuntarily move.

To test the hypothesis, data are drawn from condo apartments in New York City sold between 2005 through 2015.