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Tax Reform, Homeownership Costs, and House Prices

The effective cost of homeownership depends on the tax code. I derive a sufficient statistic formula for the effect of tax reform on house prices, and use it, together with nearly 4 million simulated tax returns, to measure the response of house prices to the Tax Cuts and Jobs Act of 2017. The measu...

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Bibliographic Details
Published in:Proceedings (Conference on Taxation) 2019-01, Vol.112, p.1-35
Main Author: Rappoport W., David E.
Format: Article
Language:English
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Summary:The effective cost of homeownership depends on the tax code. I derive a sufficient statistic formula for the effect of tax reform on house prices, and use it, together with nearly 4 million simulated tax returns, to measure the response of house prices to the Tax Cuts and Jobs Act of 2017. The measured price decline from the disincentives to itemize federal deductions is larger than the increase from higher disposable income. Measured house price declines in 269 metropolitan areas, are between 0 and 7 percent, 3 percent on average, and correlate with house price changes observed in 2018.
ISSN:1549-7542
2377-5661