Capitalization of federal taxes, the relative price of housing, and urban form: density and sorting effects
The authors investigate the impact of the tax treatment of owner-occupied housing on urban form in an economy in which high- and low-income households choose among city and suburban communities. Because housing tax policies differentially affect the relative, after-tax price of housing for high- and low-income households, and because the extent of capitalization of housing tax policies can differ across city and suburban communities, their analysis finds that housing tax policies can affect not only the density of the metropolitan area, but also can influence where rich and poor households choose to live.> > The authors also show that the impacts of housing tax policies differ depending upon whether land use constraints such as suburban large lot zoning exist. If there are no land use constraints present, increasing a subsidy to home ownership that is positively correlated with the income of the owner tends to lead to the decentralization of both rich and poor, although there are conditions under which the rich would choose to concentrate in the central city. The ambiguity of the effect on the choices of high income households suggests that impacts of the federal tax treatment of housing may differ across metropolitan areas.> > In the presence of binding large lot zoning in the suburbs, the rich have a greater incentive to decentralize while the poor are constrained to the city. Thus, housing tax policy that affects the relative price of land differentially for the rich and poor could have helped exacerbate the intense residential sorting by income that we see in many parts of the United States. Importantly, our analysis of community choice is not driven by different preferences for city or suburb that may be associated with the income elasticity of housing demand. Rather, it results from changes in relative after-tax housing prices faced by poor and rich households. Determining the empirical relevance of prices versus preferences in this matter should be an urgent
(This abstract was borrowed from another version of this item.)
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Stephen G. Cecchetti & Peter Rupert, 1996. "Mortgage interest deductibility and housing prices," Economic Commentary, Federal Reserve Bank of Cleveland, issue Feb.
- Blackley, Dixie & Follain, James R., 1983. "Inflation, tax advantages to homeownership and the locational choices of households," Regional Science and Urban Economics, Elsevier, vol. 13(4), pages 505-516, November.
- Peter Mieszkowski & Edwin S. Mills, 1993. "The Causes of Metropolitan Suburbanization," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 135-147, Summer.
- Edwin S. Mills, 1987. "Dividing up the investment pie: have we overinvested in housing?," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 13-23.
When requesting a correction, please mention this item's handle: RePEc:eee:regeco:v:32:y:2002:i:6:p:673-690. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.