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Housing taxation: from micro design to macro impact

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  • Serena Fatica

Abstract

This section discusses housing taxation from an efficiency and equity standpoint, highlighting the fiscal and macroeconomic consequences of the current tax rules. On the fiscal side, the relatively low contribution of property taxes to government budgets means that the favourable treatment of owner-occupied housing, through exemptions and relief measures, entails a revenue cost. These tax expenditures can lead to distortions in tenure choices and the allocation of capital and moreover, may ultimately contribute towards higher house prices, thus working against their intended aim of fostering home ownership. The tax break granted to mortgage interest payments also encourages highly leveraged housing investment and the accumulation of high household debts. Distributional issues, particularly when it comes to indebted households, should be taken into account when considering tax reforms aimed at enhancing the efficiency of housing taxation.

Suggested Citation

  • Serena Fatica, 2015. "Housing taxation: from micro design to macro impact," Quarterly Report on the Euro Area (QREA), Directorate General Economic and Financial Affairs (DG ECFIN), European Commission, vol. 14(1), pages 27-33, March.
    • Handle: RePEc:euf:qreuro:0141-03
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    Cited by:

    1. Alexander Leodolter & Savina Princen & Aleksander Rutkowski, 2022. "Immovable Property Taxation for Sustainable and Inclusive Growth," European Economy - Discussion Papers 156, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Doris Prammer, 2020. "Immovable property: where, why and how should it be taxed? A review of the literature and its implementation in Europe," Public Sector Economics, Institute of Public Finance, vol. 44(4), pages 483-504.

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    Keywords

    housing taxation;

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