Essays in housing, credit, remittances, and taxes: How remittances affect credit demand and housing in Colombia and how transfer taxes influence Belgian housing

This doctoral dissertation explores three main questions related to household behaviour. The first question is: what is the effect of remittances on households’ demand for credit? This question is addressed using a representative Colombian survey, revealing a double role of remittances in the demand for credit. On one hand, remittances seem to relax the household’s budget constrain leading to a reduction in its demand for all types of credit; both formal and informal. However, on the other hand, for more expensive loans requiring mortgages as collateral, remittances seem to serve as endorsement for the future repayment of the loan instalments thus augmenting the household’s demand for credit. The effect of informality is also discussed in the analysis, showing that it restricts the access to formal credit. The second question explored is: how remittances affect the housing market in an emerging economy? This answered at the aggregate level using Colombia as a case study, showing evidence that remittances seem to increase the supply of housing, which leads to a decrease in prices both for sale as well as for rent. This effect seems to affect particularly housing in low-income areas. Finally, the third question explored in this work is: How real estate transfer taxes affect the housing market? This question is addressed using the Belgian housing market for the analysis. The analysis shows an increase in housing prices as a consequence of reductions in the transfer tax. Moreover, a substitution effect from apartments to houses is evidenced, favouring the more expensive houses in detriment of the more expensive apartments. However, this substitution effect is reversed after the establishment of a price limit under which the tax discount is dispensed, with the more expensive apartments and the cheaper houses appropriating the reduction in the tax. Inequality and population distribution is also analysed, concluding that the tax reduction reduced the mean age of the treated municipalities, favouring particularly individuals aged between 36 to 55 years, in detriment of younger (26-25) and older (more than 55 years old) individuals, as well as favouring married households with children at the expense of all other types of households. Moreover, evidence is shown that Brussels’ 2015 transfer tax modification increased both income and wealth inequality, whereas Flanders’ 2014 tax reform decreased both types of inequality.