Homelessness and Property Tax Freedom:
Persistent homelessness is present across a variety of nations. These include such politically and economically diverse nations as the UK (Bramley and Fitzpatrick, 2018), the US (Early, 2005; Fargo et al, 2013; Corinth and Lucas, 2018; Glynn and Fox, 2019), Spain (Cabrera and GarciaPerez, 2020), and Australia (Cobb and Zhu, 2017). Not surprisingly, in response, there has appeared an impressive body of research literature seeking to identify factors that systematically influence this phenomenon. Such studies, especially for the US, focus on a variety of explanatory variables.
Among these variables, educational attainment, income, warmer climate, the cost of housing/rent levels (Grimes and Chressanthis, 1997; Quigley et al, 2001), and the overall cost of living (Cebula and Alexander, 2020), have been found to contribute the most consistently to the degree of homelessness.
In an effort to extend the above literature, this exploratory study provides evidence regarding the potential impact of higher property taxation on homelessness. It is argued here that the higher the average effective property tax in a state relative to income in that state, the greater the overall property tax burden to actual or would-be homeowners, to actual or would-be owners of rental property, and, ultimately, to actual or would-be renters. In the lattermost case, higher property taxes are passed along to renters in the form of higher rent, with the degree of that pass-along depending upon rental market tightness.
In other words, potentially, one’s ability to purchase/rent housing or continue to own/rent housing could be adversely impacted by higher property taxation. Furthermore, according to Stansel et al. (2018), the higher the property tax burden in a state, the greater the degree of restrictions on private choice and the greater the degree to which economic freedom declines.
Moreover, higher property tax burdens lead to lower levels of property tax freedom, i.e., lower property tax freedom reflects an increased property tax burden (Hall and Lawson, 2014). Accordingly, it is hypothesized here that the greater the freedom from property taxation (PRTXFREE) in a state, the lower the property tax burden in that state and hence the lower the risk of homelessness in that state, ceteris paribus.
Using state-level panel data for the largely post-Great Recession period from 2009 through 2016, the rate of homelessness in each state is expressed as the natural log of the percent of that state’s total population that is classified as homeless (PCTHLESS). To provide an exploratory test of the above hypothesis, the following parallel semi-log equations are to be estimated by a panel period fixed effects:
Log PCTHLESSjt = f(PRTXFREEjt, COLjt, Log PCIjt, PCTHSjt, PCTBACHjt, JANTEMPjt) (1)
Log PCTHLESSjt = g(PRTXFREEjt-1, COLjt-1, Log PCIjt-1, PCTHSjt-1, PCTBACHjt1, JANTEMPjt-1) (2)
In these equations, j refers to state j, t refers to year t, t-1 refers to year t-1, and PRTXFREE is the index of property tax freedom in each state. In addition, COL is the overall average cost of living for the average four-person family in each state; Log PCI is the natural log of per capita personal income in each state; PCTHS is the percent of the adult population age 25 and over with a high school degree only in each state;
PCBACHt is the percentage of the adult population age 25 and over with a bachelor’s degree in each state, and JANTEMP is the average high January temperature in degrees Fahrenheit in each state. Based on the aforementioned studies, COL, log PCI, PCTHS, PCTBACH, and JANTEMP are the control variables. The lagging of the explanatory variables in equation (2) seeks to provide both a modest robustness test and a rudimentary effort to address potential endogeneity.
For the interested reader, the basic descriptive statistics for PRTXFREE over the study period are, as follows: mean = 7.854; standard deviation = 1.056; maximum = 9.672; and minimum = 5.003.