Property Taxes and Housing Allocation under Financial Constraints

Property taxes impact the housing distribution across generations. Low property taxes lead to concentrated ownership among elderly empty-nesters, limiting housing for financially constrained young families. Conversely, high property taxes act as a “forced mortgage,” reducing upfront downpayments and...

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Bibliographic Details
Published in:Policy File 2024
Main Authors: Coven, Joshua, Golder, Sebastian, Gupta, Arpit, Ndiaye, Abdoulaye
Format: Report
Language:English
Subjects:
Housing
Older people
Property taxes
Online Access:Request full text
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Summary:Property taxes impact the housing distribution across generations. Low property taxes lead to concentrated ownership among elderly empty-nesters, limiting housing for financially constrained young families. Conversely, high property taxes act as a “forced mortgage,” reducing upfront downpayments and enabling greater homeownership among younger households. We show in an overlapping generations model that raising property taxes in low-tax California to match those in higher-tax Texas increases homeownership in California by 4.6% and among younger households by 7.4% in steady state. Asset taxes can reallocate housing to higher-valuation households in the presence of financial constraints, providing an independent rationale for property taxes.