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Investment Housing Tax Concessions And Welfare: A Quantitative Study For Australia

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  • Yunho Cho
  • Shuyun May Li
  • Lawrence Uren

Abstract

This article builds a general equilibrium overlapping generations (OLG) model with heterogeneous agents to study the welfare implications of investment housing tax concessions in Australia. Removing these concessions substantially reduces the landlord rate and the use of debt. There is a steady‐state welfare gain equivalent to a 0.13% increase in lifetime consumption if the additional tax revenue from removing the concessions is used to finance a lump‐sum transfer to all households. That welfare gain rises to 1.45% if the extra tax revenue is used to provide a transfer to the housing‐poor in the form of rental assistance. Over the transition, around 70% of existing households experience a welfare gain and there are important distributional effects in both cases.

Suggested Citation

  • Yunho Cho & Shuyun May Li & Lawrence Uren, 2024. "Investment Housing Tax Concessions And Welfare: A Quantitative Study For Australia," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 781-816, May.
    • Handle: RePEc:wly:iecrev:v:65:y:2024:i:2:p:781-816
    DOI: 10.1111/iere.12673
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    References listed on IDEAS

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