Housing inequality and how fiscal policy shapes it: Evidence from Belgian real estate

Abstract

We use data on the universe of real estate in Belgium to measure housing inequality and study how a policy reshaped it. We use all recent (2006-22) transactions and machine learning to predict the value of all dwellings in Belgium and estimate inequality. Our results indicate that nationwide inequality is relatively low (Gini of 0.25) but highly heterogeneous across and within municipalities. They suggest that housing (value) inequality is informative of income inequality. Our novel inequality estimates allow us to study the impact of a policy on housing inequality. Using a differences-in-differences framework, we find that a three percentage point reduction in house registration fees in Flanders increased prices by 3% and reduced inequality by 0.8% through compressing the dwelling value distribution from below. We argue that the primary winners of the policy were low-value homeowners, who saw their estate's valuation increase. Low-value renters might be adversely affected through future rent increases. The significant geographic heterogeneities documented throughout the paper highlight the importance of granularity when studying inequality and housing.

Keywords: Inequality, Housing Market, Fiscal Policy

JEL Classification: D31, R21, R31