Housing Supply Expansion and Local Government Finances in the Indiana Uplands

Abstract

New housing development can induce a permanent long-term change in the public finances of a community. This analysis uses the Local Development Public Finance Model to consider the effect of a 1 percent increase in residential homestead housing supply on the levies, property tax revenues, and circuit breaker credits from property tax caps on the taxing units in the Uplands region of Indiana. Two scenarios are considered: 1) The taxing units all hold their property tax rates constant by increasing their budget levies; 2) The taxing units all hold their budget levies constant and reduce their property tax rates. Randomly selecting undeveloped residential parcels and developing them to their respective county median valuations is the assumed development strategy. The results demonstrate overwhelmingly positive public finance implications through new property tax revenues and less binding property tax caps.