Taxation and Housing Markets: Preliminary Evidence on the Effects of Recent Tax Reforms

39 Pages Posted: 18 Apr 2007

See all articles by James M. Poterba

James M. Poterba

National Bureau of Economic Research (NBER); Massachusetts Institute of Technology (MIT) - Department of Economics

Date Written: February 1990

Abstract

The tax changes of the 1980s altered the incentives for housing consumption. Marginal tax rate reductions in both the Economic Recovery Tax Act (1981) and the Tax Reform Act (1986) reduced the attraction of homeownership, particularly at high income levels. The Tax Reform Act, by lowering depreciation allowances and implementing anti-tax shelter provisions, also reduced the net tax subsidy to rental housing. In the long run these changes will raise real rents and reduce the fraction of national income that is allocated to housing. Preliminary evidence shows a pronounced decline in rental housing construction since the 1986 tax bill, as well as a decline in the real price of owner-occupied homes which may be partly attributable to the tax change.

Suggested Citation

Poterba, James M., Taxation and Housing Markets: Preliminary Evidence on the Effects of Recent Tax Reforms (February 1990). NBER Working Paper No. w3270. Available at SSRN: https://ssrn.com/abstract=980912

James M. Poterba (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-350
Cambridge, MA 02142
United States
617-253-6673 (Phone)
617-253-1330 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
29
Abstract Views
507
PlumX Metrics