The effects of land transfer taxes on real estate markets: evidence from a natural experiment in Toronto
AbstractTaxes levied on the sale or purchase of real estate are pervasive but little studied. By exploiting a natural experiment arising from TorontoÃ¢â¬â¢s imposition of a Land Transfer Tax (LTT) in early 2008, we estimate the impact of real estate transfer taxes on the market for single family homes. Our data show that TorontoÃ¢â¬â¢s 1.1% tax caused a 15% decline in the number of sales and a decline in housing prices about equal to the tax. Relative to an equivalent property tax, the associated welfare loss is substantial, about $ 1 for every $ 8 in tax revenue. The magnitude of this welfare loss is comparable to those associated with better known interventions in the housing market. Unlike many possible tax reforms, eliminating existing LTTs in favour of revenue equivalent property taxes appears straightforward.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Journal of Economic Geography.
Volume (Year): 12 (2012)
Issue (Month): 2 (March)
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Other versions of this item:
- Ben Dachis & Gilles Duranton & Matthew A. Turner, 2011. "The effects of land transfer taxes on real estate markets: Evidence from a natural experiment in Toronto," Working Papers tecipa-423, University of Toronto, Department of Economics.
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
- R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
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