Fire protection services and house prices: A regression discontinuity investigation

Abstract

Despite its importance as a public good, little research studies how fire protection services affect housing markets or other economic outcomes. We focus on fire levies that are up for renewal so that the timing of the levy is exogenous, to help preserve the independence of votes. We use regression discontinuity to compare the price of houses in fire districts that barely pass and fail to renew a fire tax levy. House values drop at least 6.7 % the year after a community votes to cut fire protection funding, which is a quarter of a standard deviation of sale price and larger than the capitalization of crime, school quality, or environmental quality. Tax levies representing more than the median 18.8 % funding drop elicit a larger drop in house prices. The short-term decrease does not persist, though, suggesting limited awareness and a decline in risk perception over time by buyers and sellers.