Short-Term Incidence of Property Tax Hikes on Professionally Managed Apartments – Evidence from Philadelphia

Property tax incidence — who ultimately bears the tax burden — has long been central to public finance. In markets with imperfect competition, tax incidence may vary with market structure and strategic interactions, allowing landlords to absorb more or less of the tax burden than standard tax incidence theory would suggest. Exploiting a policy shock of a delayed comprehensive reassessment in Philadelphia and a unique property-level longitudinal rent dataset, this study revisits the issue of short-term tax incidence of property tax. We document that about 73 percent of tax increases were passed through to tenants in professionally managed large-scale apartments, with effects emerging approximately three quarters after the policy shock. However, we find no significant evidence of tax-induced rent increases at the broader market level, likely due to the smaller tax increases faced by most large multifamily properties and weaker cost pass-through among smaller rentals. This paper enriches the tax incidence literature by providing new evidence on the short-term tax pass-through and sheds light on the heterogeneity of landlord behavior, with implications for the optimal design of property tax systems.