Property Taxes and Housing Allocation Under Financial Constraints

59 Pages Posted: 9 Jul 2024

See all articles by Joshua Coven

Joshua Coven

NYU Stern School of Business

Sebastian Golder

University of Hamburg - Faculty of Business, Economics, and Social Sciences

Arpit Gupta

NYU Stern School of Business

Abdoulaye Ndiaye

New York University (NYU) - New York University

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Date Written: July 11, 2024

Abstract

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.

Keywords: housing affordability, housing inequality, property taxes

JEL Classification: H71, R21, H24, J11

Suggested Citation

Coven, Joshua and Golder, Sebastian and Gupta, Arpit and Ndiaye, Abdoulaye, Property Taxes and Housing Allocation Under Financial Constraints (July 11, 2024). Available at SSRN: https://ssrn.com/abstract=4880480 or http://dx.doi.org/10.2139/ssrn.4880480

Joshua Coven

NYU Stern School of Business ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Sebastian Golder

University of Hamburg - Faculty of Business, Economics, and Social Sciences

Von-Melle-Park 5
Hamburg, 20146
Germany

Arpit Gupta (Contact Author)

NYU Stern School of Business ( email )

Suite 9-160
New York, NY
United States

HOME PAGE: http://arpitgupta.info

Abdoulaye Ndiaye

New York University (NYU) - New York University ( email )

Bobst Library, E-resource Acquisitions
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New York, NY 10003-711
United States

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