As the US housing market experiences its largest contraction since the Great Depression, the Lincoln Institute of Land Policy and the Urban-Brookings Tax Policy Center took a closer look at the consequences of this crisis for state and local governments in a May 2010 conference. This article summarizes the conference events.
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As the U.S. housing market experiences
its largest contraction since the Great
Depression, the Lincoln Institute of
Land P olicy and the U rban–Brookings
Tax Policy Center took a closer look
at the consequences of this crisis for state and local
governments in a May 2010 conference. A major
theme of the discussion was the fallibility of conventional
wisdom. For example, some participants
questioned whether easy credit was in fact the
cause of the housing bubble and thus to blame for
the subsequent loss of state and local tax revenues.
Papers presented at the conference document the complexities researchers face in
determining the causes and lessons of this crisis.
- While easy credit did motivate homebuyers,
its effect was not sufficiently strong to fully
account for the housing boom.
- The housing market downturn was largely
predictable, but only by looking at state-level
rather than national data.
- Although state budgets have been battered
by fallout from the recession in the form of
lower income and sales tax revenue, these declines
have been triggered more by the broader
economic downturn than by the collapse
in housing markets.
- Local governments seem to have been
largely spared the severe budget shortfalls
plaguing many states. While housing prices
have fallen, property taxes have held up fairly
well—supporting city budgets while other
revenue sources have shrunk. However, there
is great geographic variation in these results.
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