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Taxes and House Prices

The Charles A. Dice Center Working Paper Series 97-16

Posted: 23 Dec 1997  

Dennis R. Capozza

Ross School of Business, University of Michigan

Richard K. Green

University of Southern California - Lusk Center for Real Estate

Patric H. Hendershott

University of Aberdeen - Centre for Property Research; National Bureau of Economic Research (NBER)

Date Written: December 1997

Abstract

This research assesses the impact of income and property taxes on house prices using a decadal panel data set for 63 metropolitan areas from 1970 to 1990. Our evidence is consistent with full capitalization of marginal income tax rates into house prices. Full capitalization suggests that income tax changes have limited effects on the allocation of real capital among structure types, implying that past changes in the tax advantages have had little impact on home ownership and housing investment, in contrast to the conclusions of much of the existing literature. When we apply the results to some proposed tax changes, we compute substantial house price declines and wide geographic variation.

JEL Classification: H22, R38

Suggested Citation

Capozza, Dennis R. and Green, Richard K. and Hendershott, Patric H., Taxes and House Prices (December 1997). The Charles A. Dice Center Working Paper Series 97-16. Available at SSRN: https://ssrn.com/abstract=48961

Dennis R. Capozza (Contact Author)

Ross School of Business, University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734 995 7271 (Phone)
734 629-0635 (Fax)

Richard K. Green

University of Southern California - Lusk Center for Real Estate ( email )

Los Angeles, CA 90089
United States

Patric H. Hendershott

University of Aberdeen - Centre for Property Research ( email )

Aberdeen AB24 2UF
Scotland

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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