PROPERTY TAX DIFFERENTIALS AND RESIDENTIAL RENTS IN NORTH CAROLINA

Abstract

The hypothesis that property tax differentials among communities result in rent differentials is tested in a reduced-form supply and demand model with cross-sectional data from a Southern state (North Carolina). It is postulated that the supply of capital to housing in North Carolina is considerably more elastic than for Northeastern cities where no evidence of shifting was found in empirical analysis by Larry L. Orr. The empirical analysis of North Carolina data indicates that property tax differentials are substantially shifted forward to tenants. Together with Orr 1 s analysis, this suggests that the economic effects of property taxation may vary over regions of the nation dependent of property market conditions.