Investment Housing Tax Concessions and Welfare: Evidence from Australia

38 Pages Posted: 6 Jan 2021

See all articles by Yunho Cho

Yunho Cho

Institute for Economic and Social Research, Jinan University

Shuyun May Li

University of Melbourne

Lawrence Uren

University of Melbourne

Date Written: January 6, 2021

Abstract

We build a general equilibrium overlapping generations model with heterogeneous agents to study the welfare implications of housing investment tax concessions in the Australian housing market . Comparing stationary equilibria, we find that removing these concessions significantly reduces housing investment. This lowers house prices and raises rents and the home ownership rate. The steady state welfare analysis suggests that eliminating concessions leads to a welfare gain of 1.7 per cent, for which increased redistribution is a key mechanism. Along the transition, a majority of households are better off, but younger landlords and landlords with higher incomes benefit the least.

Keywords: Housing investment, Home ownership, Taxation, OLG model, Heterogeneous Agents, Welfare

JEL Classification: D15, E21, R21, R38

Suggested Citation

Cho, Yunho and Li, Shuyun May and Uren, Lawrence, Investment Housing Tax Concessions and Welfare: Evidence from Australia (January 6, 2021). CAMA Working Paper No. 2/2021, Available at SSRN: https://ssrn.com/abstract=3760896 or http://dx.doi.org/10.2139/ssrn.3760896

Yunho Cho

Institute for Economic and Social Research, Jinan University ( email )

Huang Pu Da Dao Xi 601, Tian He District
Guangzhou, Guangdong 510632
China

Shuyun May Li (Contact Author)

University of Melbourne ( email )

Melbourne, 3010
Australia

Lawrence Uren

University of Melbourne ( email )

Melbourne, 3010
Australia
03 83447915 (Phone)

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