Property Tax Reform and the User Cost of Owner-occupied Housing in the EU

In this paper we compute the user cost of housing capital investment in four EU countries (France, Italy, Spain and the UK) following Poterba (1984, 1992) and Poterba and Sinai (2008) to investigate the role played by tax policy during the recent period. Our results suggest that current tax provisions – including both recurrent property taxes and mortgage interest tax deductions – bring about significant differences in the user cost of capital across income deciles. Taking a normative perspective, we also simulate the effects of taxing imputed rental income. In a sensitivity analysis, we show that house price evolutions have dominated other considerations about the user cost over the recent period, leading to large variations in the cost of housing investment. This even occurs when prospective homeowners incorporate a long-term view of the housing market.

BARRIOS Salvador;  FATICA Serena;  PYCROFT Jonathan; 

2016-04-01

Banca d’Italia

JRC98082

https://www.bancaditalia.it/pubblicazioni/collana-seminari-convegni/2016-0020/Beyond_the_Austerity_Dispute_-_New_Priorities_for_Fiscal_Policy.pdf,    https://publications.jrc.ec.europa.eu/repository/handle/JRC98082,