Tax Policy and House Price Dynamics
26 Pages Posted: 5 Aug 2010
Date Written: November 14, 2009
In this paper I examine the determinants of the user cost of housing, including house price inflation expectations and tax policy. I derive estimates of the user cost of housing for several U.S. metropolitan areas over the period 1995-2008 and I decompose those estimates into user cost component elasticities. In general, I find that the user cost tax elasticities are relatively small while the expected house price inflation elasticity is substantially larger and therefore plays a greater role in affecting housing market demand.
Keywords: house prices, user cost
JEL Classification: R21, H20
Suggested Citation: Suggested Citation