THE EFFECTS OF TAX EXEMPTION-ABATEMENT FOR HOUSING IMPROVEMENTS ON PROPERTY TAX REVENUE (NEW YORK)

JOHN ANTHONY SPAGNOLO, Fordham University

Abstract

This dissertation attempted to investigate the effects of New York City's J51-2.5 Tax Exemption-Abatement Program on the City's housing and to estimate the change in property tax revenue resulting from benefits granted between 1962 and 1978. The central proposition was that there is a 'market adjustment loss' of revenue which arises as the program-induced increase in supply reduces the price of housing and, consequently, the taxable value of realty throughout the market. The problem was ascertaining the portion of improvements caused by the program and developing a cost estimate equation which included an expression for the 'market adjustment loss'.^ A model, based on Muth's stock adjustment model of the housing market, was developed and used to specify an equation expressing the discounted value of all future revenue gains and losses associated with exemption-abatement benefits granted in a particular year for each of three cases: total program effectiveness, total ineffectiveness, and partial effectiveness. In the most general form, the change in revenue was expressed as a function of the cost of qualifying improvements, the rate of abatement, the amount exempted from taxation, the annual tax rate, the exemption and abatement periods, the degree of program effectiveness, the price elasticity of demand for housing stock, and the discount rate. The equations were used to calculate the program's historic total cost based on data from the Department of Housing Preservation and Development, a sample of 391 program participants certified for benefits between 1974 and 1978, a sample of 835 records from the Department of Finance's Tax Exemption-Tax Abatement Master File, 1978 and a telephone survey questioning the portion of qualifying improvements caused by the program. The method is sufficiently general to be used to calculate the revenue effects of a property tax exemption or abatement program in any other jurisdiction.^ Tax exemption-abatement was found to have resulted in a significant number of improvements to the City's housing stock, but not without reducing its property tax revenue. After qualifying the estimates for variations in the value of key parameters, it was found that in the aggregate, the benefits granted in the years 1962 through 1978 under J51 cost between $468 million and $674 million and most likely cost the City $536 million in foregone property tax revenue.^ ^

Subject Area

Economics, General

Recommended Citation

SPAGNOLO, JOHN ANTHONY, "THE EFFECTS OF TAX EXEMPTION-ABATEMENT FOR HOUSING IMPROVEMENTS ON PROPERTY TAX REVENUE (NEW YORK)" (1983). ETD Collection for Fordham University. AAI8323549.
http://fordham.bepress.com/dissertations/AAI8323549

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