Studies on the Effects of Property Taxation, Rent Control and Housing Allowances

Teemu Lyytikäinen

No 140, Research Reports from VATT Institute for Economic Research

Abstract: This thesis consists of an introduction to the economic analysis of housing markets (Chapter 1) and three studies each analyzing different housing policy instruments. Chapter 2 examines the effect on housing construction of the Finnish property tax system. The focus is on the effects of taxing undeveloped land at a higher rate than developed land. Theoretical analysis indicates that pre-development land tax should lead to faster development but a side-effect of this is that the density of development may be affected too. According to empirical results, a higher pre-development land tax increases single family housing starts but does not affect development density measured as the volume (cubic meters) per started unit. Chapter 3 analyzes the costs and benefits of rent control to tenants. The focus is on the measurement of welfare losses from misallocation of housing under rent control. Empirical results suggest that the costs of increased mismatch between dwellings and households under rent control offset much of the benefits of low rents to tenants. Chapter 4 examines the incentive effects of the Finnish housing allowance system. Theoretical analysis shows that the system creates incentives to move to dwellings with certain space–quality combinations. Empirical analysis suggests that households eligible for housing allowance do not respond to the incentives.

Keywords: Housing; property tax; rent control; housing allowance; asuminen; kiinteistövero; vuokrasääntely; asumistuki; Local public economics; Kunnallistalous; Social security; Sosiaaliturva; Taxation; Verotus; Taxation and Social Transfers; Julkisen talouden rahoitus ja tulonsiirrot (search for similar items in EconPapers)
Date: 2008
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