Land Valuation using Public Records and Kriging: Implications for Land versus Property Taxation in Cities

We construct land values for each parcel in Maricopa County (Phoenix), Arizona, from 2000 through 2018 using a novel administrative dataset containing the universe of land sales and parcel records in the county. We then compare residential land values constructed using two classes of source data, vacant land sales and land under existing structures. Estimated land values for developed parcels are nearly double when estimated using vacant land due to lot size plattage effects and other unobserved factors, calling into question use of vacant land sales to estimate the value of land under structures within our study area. Growth rates are similar, however, facilitating the possible use of vacant land price indices to trace valuations over time from an accurate base year valuation. Dynamics between prices of Maricopa County land and housing suggest hypothetical land value tax revenues are more pro-cyclical than property tax revenues, with betas with respect to national house prices of 3.7 and 2.3, respectively. By 2018, houses had recovered 96% of pre-crisis (2007) values, but land had only recovered 63%. These findings demonstrate a source of risk of dependence on public revenues from land value taxes versus a base-period revenue-neutral property tax.