Property Taxation and Residential Density

In this paper, we first theorize about the size of a house constructed on a residential lot, measured by height and footprint area. We hypothesize that the property tax rate will have a negative impact on the density of residential construction projects. Using physical descriptions for more than 50 thousand single family homes built in New Hampshire between 1972 and 2006, we find empirical evidence that higher property taxes are associated with both smaller lots and smaller houses. On balance, higher property tax rates are associated with lower residential density.