Winners and Losers from Property Taxation

Kasper Kragh Balke, Markus Karlman and Karin Kinnerud ()

No 04/2024, Working Papers from Centre for Household Finance and Macroeconomic Research (HOFIMAR), BI Norwegian Business School

Abstract: This paper studies how down-payment requirements for house purchases affect households saving and housing decisions, and the implications for macroeconomic policy. Using a quantitative model, we find that households not only postpone homeownership when the down-payment constraint is higher, but they also delay when they start saving for the house. We show analytically that this result holds under standard assumptions for households earnings and preferences. The changes to saving and portfolio choices affect the distribution of liquidity-constrained households, which in turn impacts aggregate responses to policy. Specifically, the cash-flow channel of monetary policy is reduced, and it becomes increasingly important to direct fiscal transfers at low-income households to achieve the largest consumption response. We also find that a stricter down-payment requirement is associated with substantial welfare costs, especially for high-income households

Keywords: down-payment requirement; heterogeneous households; housing; life cycle; loan-to-value constraint; marginal propensity to consume (search for similar items in EconPapers)
Pages: 70 pages
Date: 2024
New Economics Papers: this item is included in nep-dge, nep-pbe and nep-ure
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https://hdl.handle.net/11250/3149003

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Persistent link: https://EconPapers.repec.org/RePEc:bbq:wpaper:0011

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