Taxation and housing markets with search frictions

Danilo Liberati and Michele Loberto

No 1105, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Housing taxation is an important policy instrument that shapes households’ choices about homeownership and renting as well as the evolution of the housing market. We study the effects of housing taxation in a model with search and matching frictions in the property market and a competitive rental market. We show a new transmission channel for a housing tax reform that works through a ‘shifting’ effect from landlords to tenants. We calibrate the model in order to estimate the long-run effects of the recent Italian housing market taxation reforms and the extent of property tax capitalization on house prices. We show that property taxation on owner-occupied dwellings has a negative effect on property and rental prices, whereas taxes on second homes have opposite qualitative effects. The simultaneous increase in both these instruments may mitigate the dynamics of prices and rents as well as the change in the ratio between the share of owners and renters, leading to a partial capitalization taxation on prices.

Keywords: housing market; matching; property taxation (search for similar items in EconPapers)
JEL-codes: E62 R21 R31 (search for similar items in EconPapers)
Date: 2017-03
New Economics Papers: this item is included in nep-dge, nep-eur, nep-law, nep-mac, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.bancaditalia.it/pubblicazioni/temi-disc ... 105/en_tema_1105.pdf (application/pdf)

Related works:
Journal Article: Taxation and housing markets with search frictions (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1105_17

Access Statistics for this paper

More papers in Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by ().