Keeping it in the family: inheritance taxation and housing-market turnover

Bluebery Planterose and Rémi Lei ()
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Bluebery Planterose: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris
Rémi Lei: BSE - Bordeaux sciences économiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris

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Abstract: Inheritance tax systems often reward families for holding assets rather than selling them. How does this dynastic retention affect other households' opportunities to buy a home? We study French life estates, which, like some U.S. trusts, offer inheritance-tax savings at the cost of reduced flexibility over future sales. A simple model shows how these incentives can lead families to retain assets they would otherwise sell. To measure the consequences for housing markets, we link property, sales, and death records to reconstruct the universe of homeownership changes in France over 2011-2021. Using an event-study design that combines an age-based tax notch with affected cohorts' initial housing shares across neighborhoods, we show that tax-induced life-estate adoption reduces total local sales. Non-homeowners account for 76% of the decline despite representing 52% of baseline purchases, while buyers under 35 account for 53% against a baseline share of 39%. We then follow life-estate homes after parental death to assess whether later sales offset the initial decline. Their cumulative resale probabilities converge to those of ordinary bequests within five years, with little evidence of a compensating surge. Combining our findings with population projections in a dynamic accounting exercise, we project that removing life estates could increase cumulative sales by 3.5% through 2050. Our results imply that inheritance-tax avoidance has real economic costs beyond forgone revenue, as incentives to retain housing within families can limit other households' opportunities to become homeowners.

Date: 2026-10-07
Note: View the original document on HAL open archive server: https://hal.science/hal-05784531v1
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