Volume 17, Issue 1

2006

 

 

The growing differential between tax rates for single-family dwellings and apartments is evidence of several accelerating trends. For single-family housing, the rate has declined over the past decade as the role of the property tax has diminished and other forms of revenue have become more significant. Moreover, new suburban residential developments have seen rapidly increasing use of privatization to supplant local government services and taxes. Apartments tend to be concentrated in older, more densely settled urban areas that continue to rely on the property tax, grow more slowly, and depend more on local governments for services. Fiscal zoning, reinforced by fiscal impact analysis and homeowners’ economic self-interest, has militated against building apartments in growing areas.

Given policies that favor homeownership and foster single-family housing as an investment, market forces will likely work to close the tax rate gap by restricting locally financed services to those who cannot afford to pay for them.