Taxes on Buildings and Land in a Dynamic Model of Real Estate Markets
AbstractHenry George’s single tax on land is an elusive concept to implement, because land is occupied by a variety of buildings or is undeveloped. Land value is undefined since the value of the land lying under buildings is difficult to estimate and does not correspond to real market value. Therefore, it is hard to find taxes that are accurately related to land value and, hence, to the ability to pay and still satisfy George’s axiom. Static models unrealistically pretend that all the land is available in the market at all points in time. To properly treat dynamics, a generalized perfect-foresight model of real estate markets solvable by simulation is presented. Using a version of this model stripped-down to its bare essentials, the effects of the conventional ad-valorem property tax and of an ad-valorem tax on undeveloped land are analyzed. We show a new result that the conventional tax speeds up the demolition-reconstruction cycle, shortening the life span of buildings and thus resulting in excessive use of structural capital over time, while a tax on undeveloped land has the opposite effects. We then turn to the application of the dynamic simulation model to the optimal taxation problem adapted to real estate markets. In this problem a different tax rate is levied on each type of undeveloped land and each type of building to meet a desired revenue goal, recognizing the different price elasticities of demand and supply for these assets. The formulation is designed to calculate deadweight losses associated with such optimal taxation schemes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Urban/Regional with number 0302004.
Date of creation: 14 Feb 2003
Date of revision:
Note: Type of Document -
Contact details of provider:
Web page: http://22.214.171.124
Find related papers by JEL classification:
- R - Urban, Rural, Regional, Real Estate, and Transportation Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-02-18 (All new papers)
- NEP-GEO-2003-02-18 (Economic Geography)
- NEP-URE-2003-02-18 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Small, Kenneth A & Rosen, Harvey S, 1981.
"Applied Welfare Economics with Discrete Choice Models,"
Econometric Society, vol. 49(1), pages 105-30, January.
- Harvey S. Rosen & Kenneth A. Small, 1979. "Applied Welfare Economics with Discrete Choice Models," NBER Working Papers 0319, National Bureau of Economic Research, Inc.
- Bentick, Brian L, 1979. "The Impact of Taxation and Valuation Practices on the Timing and Efficiency of Land Use," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 859-68, August.
- Anas, Alex & Arnott, Richard J., 1997.
"Taxes and allowances in a dynamic equilibrium model of urban housing with a size--quality hierarchy,"
Regional Science and Urban Economics,
Elsevier, vol. 27(4-5), pages 547-580, August.
- Richard Arnott & Alex Anas, 1995. "Taxes and Allowances in a Dynamic Equilibrium Model of Urban Housing with a Size-Quality Hierarchy," Boston College Working Papers in Economics 309., Boston College Department of Economics.
- Skouras, A, 1978. "The Non-Neutrality of Land Taxation," Public Finance = Finances publiques, , vol. 33(1-2), pages 113-34.
- Kanemoto, Yoshitsugu, 1985. "Housing as an asset and the effects of property taxation on the residential development process," Journal of Urban Economics, Elsevier, vol. 17(2), pages 145-166, March.
- Anas, Alex & Arnott, Richard J., 1993. "A fall in construction costs can raise housing rents," Economics Letters, Elsevier, vol. 41(2), pages 221-224.
- Arnott, Richard, 2000.
"Neutral Property Taxation,"
Berkeley Program on Housing and Urban Policy, Working Paper Series
qt27h7789n, Berkeley Program on Housing and Urban Policy.
- Anas Alex & Arnott Richard J., 1993.
"Technological Progress in a Model of the Housing - Land Cycle,"
Journal of Urban Economics,
Elsevier, vol. 34(2), pages 186-206, September.
- Richard Arnott & Alex Anas, 1993. "Technological Progress In A Model Of The Housing Land Cycle," Boston College Working Papers in Economics 240, Boston College Department of Economics.
- Mills, David E., 2001. "Land value taxation," Regional Science and Urban Economics, Elsevier, vol. 31(6), pages 765-770, November.
- Alex Anas & Richard Arnott, 1989. "Dynamic Housing Market Equilibrium with Taste Heterogeneity," Discussion Papers 834, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.