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The Impact of Targeted Homeownership Tax Credit Program: Evidence From Washington, D.C. Author: Zhong Yi Tong Dissertation School: University of Maryland at College Park Pages: 289 Publication Date: January 2003 Availability: Access Number: 10772 Abstract: The goal of this dissertation is to conduct the first comprehensive study of two major homebuyer tax credit programs recently implemented at local level and their replicability in other distressed central cities in the United States. The first program provides a federal income tax credit of up to $5,000 to first-time homebuyers in Washington, D.C., which went into effect on August 6, 1997, and will expire on January 2, 2002. The second program is a local innovation of Baltimore City that uses property tax credits to attract homebuyers into a targeted inner city neighborhood. This dissertation will conduct impact analyses to determine whether the homebuyer tax credit as used in Washington, D.C. and Baltimore is a cost-effective policy instrument to accomplish the designed public policy goals. While structured differently, these two homebuyer tax credit programs are primarily designed to help solve the same sets of core problems facing distressed central cities. Specifically, both of them are intended to increase homeownership (and population) by attracting buyers from both the city and suburbs, boost the housing markets, and improve the city's fiscal conditions. Using tax records, other administrative data, and a unique transaction-assessment database, this dissertation will assess the effect of the tax credit programs on homeownership (including for lower-income households), estimate their impact on housing market dynamics and especially house price appreciation, and evaluate their net fiscal effects on governments. These analyses will be conducted in the framework of intervention analysis, difference-in-difference approach, and hedonic pricing models. Based on the evaluation theories developed by Cook and Campbell (1979), newly advanced econometric techniques and my previous study of house price dynamics (Tong and Glascock 2000), the dissertation will use a three-stage estimation strategy to carry out an intervention analysis. The strategy will partial out the impact of the homebuyer credit interventions from the impacts of possible alternative historical events (observed and unobserved) on amenity-adjusted house price appreciation. Understanding the impact of these two different homebuyer tax credit programs is important for policymakers to consider using the homebuyer tax credit as an innovative and cost-effective policy instrument to help solve urban problems and renew distressed central cities and neighborhoods in this country. Therefore, this dissertation addresses two of the top HUD's policy priorities - "development of inner cities" and "community development and community building." This study is directly related to another HUD's priority - homeownership because an important effect of the credit programs to be examined will be on boosting homeownership for central cities and lower-income families. The dissertation will also address other two HUD's priorities by using a sophisticated three-stage intervention analysis to assess the impacts of policy interventions and historical events as new factors that affect housing market dynamics, including changes in owner-occupied housing stock. |
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