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Property Taxes and Housing Allocation Under Financial Constraints

Author

Listed:
  • Joshua Coven

    (CUNY Baruch College)

  • Sebastian Golder

    (New York University)

  • Arpit Gupta

    (New York University)

  • Abdoulaye Ndiaye

    (New York University, Stern School of Business)

Abstract

Low property taxes amplify lock-in among elderly homeowners, limiting housing access for young families. Raising them reallocates housing toward the young through two channels: capitalization into lower prices reduces required down-payments for financially constrained buyers, a form of embedded leverage, while higher tax obligations raise holding costs for older owners. In our overlapping generations model, raising California's property taxes to Texas levels increases young homeownership while decreasing elderly homeownership. Removing step-up basis also lowers elderly homeownership, suggesting their tenure is sustained by bequest tax advantages. The tax treatment of housing shapes housing allocation across generations.

Suggested Citation

  • Joshua Coven & Sebastian Golder & Arpit Gupta & Abdoulaye Ndiaye, 2026. "Property Taxes and Housing Allocation Under Financial Constraints," Working Papers 2026-010, Human Capital and Economic Opportunity Working Group.
    • Handle: RePEc:hka:wpaper:2026-010
    Note: M
    as

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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Coven_Golder_Gupta_etal_2026_property-tax-housing-allocation.pdf
    File Function: First version, August 1, 2026
    Download Restriction: no
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    More about this item

    Keywords

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    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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