Discussion paper

DP19230 Property Taxes and Housing Allocation Under Financial Constraints

Property taxes impact the housing distribution across generations. Low property taxes lead to concentrated ownership among elderly empty-nesters, limiting housing for financially constrained young families. Conversely, high property taxes act as a ``forced mortgage,'' reducing upfront downpayment costs and enabling greater homeownership among younger households. We show in an overlapping generations model that raising property taxes in low-tax California to match those in higher-tax Texas increases homeownership in California by 4.6% and among younger households by 7.4% in steady state. Asset taxes can reallocate housing to higher-valuation households in the presence of financial constraints, providing an independent rationale for property taxes.


Coven, J, S Golder, A Gupta and A Ndiaye (2024), ‘DP19230 Property Taxes and Housing Allocation Under Financial Constraints‘, CEPR Discussion Paper No. 19230. CEPR Press, Paris & London. https://cepr.org/publications/dp19230