Town versus Gown: The Effect of a College on Housing Prices and the Tax Base
AbstractThis paper investigates whether the presence of college increases house prices and the tax base. Colleges provide cultural and recreational amenities to the surrounding area but lifestyle choices of students may create negative externalities that depress property prices. In addition, colleges are exempt from property taxes. While the property tax exemption reduces the tax base, the amenity value of the college may cause more development on the remaining land. Previous literature considers the impact of a wide range of amenities including open space, however, none try to capture the effect from a college in a given area. We find that the presence of a college is associated with house prices that are about 11 percent higher. However, the interaction of the college dummy and enrollment is also significant and negative. Taken together, the results suggest that small colleges have the largest effect on house prices and the positive effect on house prices disappears once the college enrollment reaches about 12,500 students. We also find that the effect on house prices is stronger for four-year colleges (14 percent higher) and that the source of the differential is the degree to which the college is residential. For the tax base, the story is simpler. The presence of a college is associated with a tax base that is about 24 percent higher. As is the case with house prices, the effect of a four-year college on the tax base is stronger (about 32 percent) than the effect of a community college. However, neither the size of the college nor the degree to which the college is residential has an impact on the tax base.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 18998.
Date of creation: 07 Jul 2009
Date of revision: 30 Nov 2009
Keywords: tax base; college; local amenities.;
Other versions of this item:
- Donald Vandegrift & Amanda Lockshiss & Michael Lahr, 2012. "Town versus Gown: The Effect of a College on Housing Prices and the Tax Base," Growth and Change, Gatton College of Business and Economics, University of Kentucky, Gatton College of Business and Economics, University of Kentucky, vol. 43(2), pages 304-334, 06.
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-11 (All new papers)
- NEP-PBE-2009-12-11 (Public Economics)
- NEP-URE-2009-12-11 (Urban & Real Estate Economics)
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