Taxes, House Prices and Housing Consumption

95-9, The Charles A. Dice Center for Research in Financial Economics Working Papers Series

Posted: 7 Jul 1998

See all articles by Dennis R. Capozza

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: Undated

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. We find that marginal income and property tax rates are fully capitalized into house prices and explain a significant proportion of the regional variation in house prices. Applying the results to proposed tax changes, we show that removal of the interest and property tax deduction will reduce the average house price by 14% and could result in house price declines of up to 30% in some locations.

JEL Classification: R31

Suggested Citation

Capozza, Dennis R. and Green, Richard K. and Hendershott, Patric H., Taxes, House Prices and Housing Consumption (Undated). 95-9, The Charles A. Dice Center for Research in Financial Economics Working Papers Series, Available at SSRN: https://ssrn.com/abstract=9030

Dennis R. Capozza

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 )

2250 Alcazar Street
Los Angeles, CA 90089
United States

Patric H. Hendershott (Contact Author)

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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