Land Value Taxation and Housing Development

Abstract

Abstract. The effects of land value taxation on housing development are studied in three disparate cities: Pittsburgh, McKeesport, and New Castle, Pennsylvania. These places are examples of three different types of city: central city, suburban city, and relatively isolated city, respectively. Shifting taxes from buildings to land is hypothesized to have different effects in the different types of cities. A liquidity effect, due to increases in the land tax rate, is expected to operate in all three types of cities. An incentive effect, due to decreases in the tax rate on improvements, is expected to function in central cities and, possibly, in relatively isolated cities. It is not expected to be important in suburban cities such as McKeesport. An incentive effect was found in Pittsburgh, but not in the other two cities. No evidence of a liquidity effect was found in any of the three cities. An explanation of why observed effects may not conform with hypotheses is given.