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Residential Energy Demand and the Taxation of Housing

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  • William M. Gentry

Abstract

This paper examines how the favorable tax treatment of housing capital in the U.S. affects the demand for residential energy. Relative to a tax system that is neutral between different investments, the current taxation of housing lowers the cost of housing capital by 23%. The tax subsidy for housing capital increases the demand for housing services and the concomitant energy demand and creates an incentive for the substitution of capital for energy in the production of housing services. Eliminating this tax subsidy for housing would lower the demand for housing services by 11.8% and residential energy demand by 6.8%. Alternatively, the same reduction in residential energy demand could be obtained through a 20% tax on residential energy.

Suggested Citation

  • William M. Gentry, 1994. "Residential Energy Demand and the Taxation of Housing," The Energy Journal, , vol. 15(2), pages 89-105, April.
    • Handle: RePEc:sae:enejou:v:15:y:1994:i:2:p:89-105
    DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No2-5
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    References listed on IDEAS

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    1. Miranowski, John & Dinan, T., 1989. "Estimating the Implicit Price of Energy Efficiency Improvement in the Residential Housing Market: A Hedonic Approach," Staff General Research Papers Archive 10698, Iowa State University, Department of Economics.
    2. Dinan, Terry M. & Miranowski, John A., 1989. "Estimating the implicit price of energy efficiency improvements in the residential housing market: A hedonic approach," Journal of Urban Economics, Elsevier, vol. 25(1), pages 52-67, January.
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