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Investment housing tax concessions and welfare: Evidence from Australia

Yunho Cho, Shuyun May Li and Lawrence Uren

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We build a general equilibrium overlapping generations model with heterogeneous agents to study the welfare implications of housing investment tax concessions in the Australian housing market . Comparing stationary equilibria, we find that removing these concessions significantly reduces housing investment. This lowers house prices and raises rents and the home ownership rate. The steady state welfare analysis suggests that eliminating concessions leads to a welfare gain of 1.7 per cent, for which increased redistribution is a key mechanism. Along the transition, a majority of households are better off, but younger landlords and landlords with higher incomes benefit the least.

Keywords: Housing investment; Home ownership; Taxation; OLG model; Heterogeneous Agents; Welfare (search for similar items in EconPapers)
JEL-codes: D15 E21 R21 R38 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2021-01
New Economics Papers: this item is included in nep-dge, nep-mac, nep-pbe, nep-pub and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2021-02

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