Property Taxes and Housing Allocation Under Financial Constraints

Joshua Coven, Sebastian Golder, Arpit Gupta and Abdoulaye Ndiaye ()
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Joshua Coven: CUNY Baruch College
Sebastian Golder: New York University
Arpit Gupta: New York University
Abdoulaye Ndiaye: New York University, Stern School of Business

No 2026-010, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: Low property taxes amplify lock-in among elderly homeowners, limiting housing access for young families. Raising them reallocates housing toward the young through two channels: capitalization into lower prices reduces required down-payments for financially constrained buyers, a form of embedded leverage, while higher tax obligations raise holding costs for older owners. In our overlapping generations model, raising California's property taxes to Texas levels increases young homeownership while decreasing elderly homeownership. Removing step-up basis also lowers elderly homeownership, suggesting their tenure is sustained by bequest tax advantages. The tax treatment of housing shapes housing allocation across generations.

Keywords: housing affordability; housing inequality (search for similar items in EconPapers)
JEL-codes: H24 H71 J11 R21 (search for similar items in EconPapers)
Date: 2026-09
Note: M
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http://humcap.uchicago.edu/RePEc/hka/wpaper/Coven_ ... using-allocation.pdf First version, August 1, 2026 (application/pdf)

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