Housing inequality and how fiscal policy shapes it: Evidence from Belgian real estate

We use detailed information on all real estate stock and transactions since 2006 to study housing inequality in Belgium and how a recent policy shaped it. We use the transactions to predict the market value of all dwellings in the country, to then estimate inequality in value or space at different levels of aggregation – from the federal to the local neighborhood level. Overall inequality is relatively low (Gini of 0.25), but significant heterogeneity exists across and within municipalities. Using a differences-in-differences framework, we study how Flanders’s recent 3% reduction in registration fees affected house prices and inequality. We estimate that the policy increased prices by 3% on average and reduced inequality in Flanders by 0.8% by compressing the price distribution from below. We argue that the primary winners of the policy are low-value homeowners, who see their estate’s valuation increase. The main losers are low-value renters, who might see rent increases in the short term. Both parts of the paper reveal significant geographic heterogeneities, thus highlighting the importance of granularity in the data for studying inequality.