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The Impact of Preferential Assessment on Housing Affordability Author: Leah J. Tsoodle Dissertation School: Kansas State University Pages: 162 Publication Date: 2006 Availability: Access Number: 5006 Abstract: Property tax is an important issue for local governments as well as property owners and renters. The hypothesis of this research is that rents in urban areas are higher because agricultural property is valued at a lower rate than residential property. To test the research hypothesis, three questions must be answered: 1) What determines the market value for agricultural land around urban population centers in Kansas? 2) Are reductions in residential property taxes passed on to renters; in other words, would rent be lower? 3) How much would property taxes be reduced for residential properties and increased for agricultural land if value was taxed at market value around urban population centers? First, a model that incorporated hedonic and negative exponential distance components was estimated to determine how price was impacted by these elements. The negative exponential components were incorporated to capture urban influence on land price. Results imply that state property tax policy may differently affect landowners involved in sales in different areas; the urban influence outside of Kansas City is different than the urban influence outside of Wichita. The next step was to determine whether property owners can pass property taxes on to renters. The effective tax rate had a positive and significant impact on rent, meaning rents decrease (increase) with decreases (increases) in effective property tax rates. For a decrease of 0.34 percent in the property tax rate, residential rents would be reduced by between $200 and $227 annually. Finally, a simulation that combined the information from the first two steps was constructed for Kansas. Assuming a revenue neutral shift, the net effective tax decreases for residential properties would result in higher rent declines in areas in or near urban centers in Kansas. The agricultural effective tax rate increases were the smallest in rural counties and the largest in urban counties. This indicates that the bulk of a tax policy change would fall on agricultural landowners in urban and adjacent counties. |
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