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Property Taxation and Density of Land Development: A Simple Model with Numerical Simulations

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  • Richard W England

    (Department of Economics, University of New Hampshire, Durham NH 03824, USA.)

  • Mohan Ravichandran

    (Department of Mathematics, University of New Hampshire, Durham NH 03824, USA.)

Abstract

This paper presents a microeconomic model of the choice of density for a newly developed parcel of land within a metropolitan region. Analysis reveals that this decision depends upon the anticipated rents, interest rate, construction and operating costs, and tax rate levied on building value. The tax rate levied on the land value of the parcel does not influence density if that tax is fully capitalized into the land price paid by the developer. Because a closed form solution of the model is elusive, we report the results of several numerical simulations. We find that the property tax rate levied on newly constructed buildings could affect the density of real estate development projects.

Suggested Citation

  • Richard W England & Mohan Ravichandran, 2010. "Property Taxation and Density of Land Development: A Simple Model with Numerical Simulations," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 36(2), pages 229-238, Spring.
    • Handle: RePEc:pal:easeco:v:36:y:2010:i:2:p:229-238
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    Cited by:

    1. England, Richard W. & Zhao, Min Qiang & Huang, Ju-Chin, 2013. "Impacts of property taxation on residential real estate development," Journal of Housing Economics, Elsevier, vol. 22(1), pages 45-53.
    2. Joshua M. Duke & TianHang Gao, 2023. "Land Value Taxation: A Spatially Explicit Economic Experiment with Endogenous Institutions," The Journal of Real Estate Finance and Economics, Springer, vol. 67(4), pages 673-694, November.
    3. repec:wyi:journl:002186 is not listed on IDEAS

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