Tax Reform, Homeownership Costs, and House Prices

29 Pages Posted: 14 Jan 2019

Date Written: January 1, 2019

Abstract

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 potential response of house prices to the Tax Cuts and Jobs Act of 2017. The price decline from the disincentives to itemize federal deductions is five-fold the price increase from higher disposable income, so my simulation suggests that house prices can decline about 2 percent on average, and up to 7 percent, in my sample of 269 metropolitan areas.

Keywords: Public Economics, Sufficient Statistics, House Prices, Tax Cuts and Jobs Act, TCJA

JEL Classification: H24, R28

Suggested Citation

Rappoport Wurgaft, David Elias, Tax Reform, Homeownership Costs, and House Prices (January 1, 2019). Available at SSRN: https://ssrn.com/abstract=3308983 or http://dx.doi.org/10.2139/ssrn.3308983

David Elias Rappoport Wurgaft (Contact Author)

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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