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Property Tax and Tenure Choice: Implications for China

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Author Info

  • Jian Chen

    ()
    (IFE Group, 51 Monroe Street, Rockville, MD 20850, USA, and Johns Hopkins University)

  • David H. Downs

    ()
    (The Kornblau Institute, Virginia Commonwealth University)

Abstract

This paper examines real property tax as a determinant of tenure choice. The analysis is conducted in two stages. First, parameter estimates for a reduced-form homeownership model are obtained through multivariate logistic regression on data drawn from the U.S. Survey of Income and Program Participation (SIPP). Second, data from the Chinese Household Income Project (CHIP) is used to obtain predicted homeownership for China by using the SIPP-based model. Actual and predicted values of homeownership in China are presented, and the marginal effect of property tax is computed. Overall, we find that tenure choice is significantly influenced by property tax, even after controlling for a wide range of supply and demand considerations. Furthermore, and in the case of China, we show that the negative impact of property tax on homeownership may be mitigated by corresponding ownership incentives (e.g., tax policy). To the best of our knowledge, this is the first paper to explicitly analyze property tax in this regard. Implications based on the empirical analysis are applicable to the evolution of property tax policy in China.

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Bibliographic Info

Article provided by Asian Real Estate Society in its journal International Real Estate Review.

Volume (Year): 16 (2013)
Issue (Month): 3 ()
Pages: 323-343

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Handle: RePEc:ire:issued:v:16:n:03:2013:p:323-343

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Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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Web page: http://www.asres.org/

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Postal: Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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Related research

Keywords: Real Property Tax; Tenure Choice; China;

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References

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  1. Painter, Gary & Redfearn, Christian L, 2002. "The Role of Interest Rates in Influencing Long-Run Homeownership Rates," The Journal of Real Estate Finance and Economics, Springer, vol. 25(2-3), pages 243-67, Sept.-Dec.
  2. Polinsky, A. Mitchell & Rubinfeld, Daniel L., 1978. "The long-run effects of a residential property tax and local public services," Journal of Urban Economics, Elsevier, vol. 5(2), pages 241-262, April.
  3. Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2009. "Accounting For Changes In The Homeownership Rate," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 677-726, 08.
  4. Brueckner, Jan K. & Saavedra, Luz A., 2001. "Do Local Governments Engage in Strategic Property-Tax Competition?," National Tax Journal, National Tax Association, vol. 54(n. 2), pages 203-30, June.
  5. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-71, Nov./Dec..
  6. Alm, James & Buschman, Robert D. & Sjoquist, David L., 2011. "Rethinking local government reliance on the property tax," Regional Science and Urban Economics, Elsevier, vol. 41(4), pages 320-331, July.
  7. Gabriel, Stuart & Painter, Gary, 2003. "Pathways to Homeownership: An Analysis of the Residential Location and Homeownership Choices of Black Households in Los Angeles," The Journal of Real Estate Finance and Economics, Springer, vol. 27(1), pages 87-109, July.
  8. L. Jide Iwarere & John E. Williams, 1991. "A Micro-Market Analysis of Tenure Choice Using the Logit Model," Journal of Real Estate Research, American Real Estate Society, vol. 6(3), pages 327-340.
  9. Byron Lutz & Raven Molloy & Hui Shan, 2010. "The housing crisis and state and local government tax revenue: five channels," Finance and Economics Discussion Series 2010-49, Board of Governors of the Federal Reserve System (U.S.).
  10. Songtao Wang & Su Han Chan & Bohua Xu, 2012. "The Estimation and Determinants of the Price Elasticity of Housing Supply: Evidence from China," Journal of Real Estate Research, American Real Estate Society, vol. 34(3), pages 311-344.
  11. Peter M. Zorn, 1989. "Mobility-Tenure Decisions and Financial Credit: Do Mortgage Qualification Requirements Constrain Homeownership?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(1), pages 1-16.
  12. Hongwei Wang & Ko Wang, 2012. "What is Unique about Chinese Real Estate Markets?," Journal of Real Estate Research, American Real Estate Society, vol. 34(3), pages 275-290.
  13. Bostic, Raphael W & Surette, Brian J, 2001. "Have the Doors Opened Wider? Trends in Homeownership Rates by Race and Income," The Journal of Real Estate Finance and Economics, Springer, vol. 23(3), pages 411-34, November.
  14. Coulson, N Edward, 2002. "Regional and State Variation in Homeownership Rates; or If California's Home Prices Were As Low As Pennsylvania's Would Its Ownership Rate Be As High?," The Journal of Real Estate Finance and Economics, Springer, vol. 24(3), pages 261-76, May.
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