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Property Taxes and Housing Allocation Under Financial Constraints

Author

Listed:
  • Coven, Joshua
  • Golder, Sebastian
  • Gupta, Arpit
  • Ndiaye, Abdoulaye

Abstract

Property taxes impact the housing distribution across generations. Low property taxes lead to concentrated ownership among elderly empty-nesters, limiting housing for financially constrained young families. Conversely, high property taxes act as a ``forced mortgage,'' reducing upfront downpayment costs and enabling greater homeownership among younger households. We show in an overlapping generations model that raising property taxes in low-tax California to match those in higher-tax Texas increases homeownership in California by 4.6% and among younger households by 7.4% in steady state. Asset taxes can reallocate housing to higher-valuation households in the presence of financial constraints, providing an independent rationale for property taxes.

Suggested Citation

  • Coven, Joshua & Golder, Sebastian & Gupta, Arpit & Ndiaye, Abdoulaye, 2024. "Property Taxes and Housing Allocation Under Financial Constraints," CEPR Discussion Papers 19230, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19230
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    More about this item

    Keywords

    housing affordability; Housing inequality; Property taxes;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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