Property Taxes and Housing Allocation Under Financial Constraints

Joshua Coven, Sebastian Golder, Arpit Gupta and Abdoulaye Ndiaye

No 19230, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: housing affordability; Housing inequality; Property taxes (search for similar items in EconPapers)
JEL-codes: H24 H71 J11 R21 (search for similar items in EconPapers)
Date: 2024-07
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Working Paper: Property Taxes and Housing Allocation under Financial Constraints (2024)
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