The Influence of TIF Overlay Zoning on Residential Real Estate Prices

Abstract

Tax increment financing, a form of overlay zoning, are purported to spur economic development and promote the public interest of the community. However, these municipal overlay zones frequently generate hostility due to their use of public funds. While a large volume of knowledge exists on the impact of residential real estate prices within a tax increment financing district, little is known about the impact of the municipal overlay zone on the surrounding community. Using four, similarly timed, but separate tax increment financing districts and a transactional residential real estate dataset, we test price implications for residential real estate property at three separate geographic distances. Using propensity score matching and fixed effects modeling, we find that the imposition of tax increment financing districts increased surrounding residential real estate property values.

Keywords:

• Tax increment financing
• overlay zoning
• residential real estate
• price externalities
• propensity score matching