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The economic implications of house price capitalization: a synthesis

Christian Hilber ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: In this article I argue that the extent to which fiscal variables are capitalized into house prices has important economic implications. I synthesize an emerging literature that explores the conditions under which public and private investments and intergovernmental transfers are capitalized into local house prices and the broader implications of such capitalization. The main insights are: (i) House price capitalization is more pronounced in locations with strict regulatory and geographical supply constraints; (ii) capitalization can – under certain conditions – induce the provision of durable local public goods and club goods; and (iii) capitalization effects – which are habitually ignored by policy makers – have important adverse consequences for a wide range of policies such as intergovernmental aid or the mortgage interest deduction.

Keywords: House price capitalization; homeownership; local public goods; club goods; land use regulation; land and housing supply; incentives to invest; redistribution (search for similar items in EconPapers)
JEL-codes: D71 R21 R31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
Date: 2017-05-01
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Published in Real Estate Economics, 1, May, 2017, 45(2), pp. 301-339. ISSN: 1080-8620

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http://eprints.lse.ac.uk/62118/ Open access version. (application/pdf)

Related works:
Journal Article: The Economic Implications of House Price Capitalization: A Synthesis (2017) Downloads
Working Paper: The economic implications of house price capitalization: a synthesis (2015) Downloads
Working Paper: The Economics Implications of House Price Capitalization: A Synthesis (2011) Downloads
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