NCPA - National Center for Policy Analysis

Tax Change A Factor In Urban Renewal

August 12, 1999

The recent tax law change that exempted the proceeds from selling one's home from capital gains taxes has been a factor in increasing the value of urban homes. Suburban home-sellers bored with the cul-de-sacs and clogged highways of suburban life can choose a smaller inner-city home or condo and pocket the gains.

And they are doing so -- fueling double-digit appreciation rates in urban neighborhoods. From Boston to Cincinnati and Detroit to Denver, urban price-appreciation rates have kept up with -- and in many cases exceeded -- increases in suburban home values.

  • In 1998 alone, urbanites in Chicago's Cook County saw their homes appreciate by 5.4 percent -- while their suburban neighbors in DuPage County saw prices increase by an average of only 4.9 percent.
  • Residents of Denver witnessed a 12.7 percent increase in home values that year -- while suburbanites in adjacent Arapahoe County had to content themselves with an increase of only 7.9 percent.
  • Those inhabiting the urban Detroit saw values increase 6.1 percent -- while those living in nearby Oakland County experienced only a 5.7 percent jump.
  • While the jump of 12.1 percent in Los Angeles residential properties trailed the 13.7 percent increase in suburban Orange County, few sellers were ready to complain.

Rising home values don't mean that the exodus from cities has been reversed, however. In 1996 and 1997, 2.4 million more Americans moved out of central cities than moved in, but the pace of departures seems to be slowing -- also due in part to falling crime rates. Detroit's population, for example, has fallen 5.6 percent so far this decade -- far less than the 15 percent decline in the late 1980s.

Source: Carlos Tejada, "For Many City Dwellers, Home Values Finally Head Up," Wall Street Journal, August 12, 1999.


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