House ownership and taxes
The household portfolio is dominated by a small number of assets; primarily housing and mortgages. We compare data on actual portfolios of Norwegian households with estimated optimal portfolios, using traditional financial theory. We find actual portfolios to be close to the portfolio indicated by a mean-variance frontier, based on four assets and estimated under assumptions of short sale constraints. This result is sustained even in a no-tax regime. To induce a substantial change from housing to equity, taxation of the consumption stream from housing is needed. An alternative; taxation of capital gains from housing investment; could actually increase the relative holding of housing.
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- Englund, Peter & Hwang, Min & Quigley, John M., 2002.
"Hedging Housing Risk,"
Berkeley Program on Housing and Urban Policy, Working Paper Series
qt06t5d6v0, Berkeley Program on Housing and Urban Policy.
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- James M. Poterba, 1983.
"Tax Subsidies to Owner-occupied Housing: An Asset Market Approach,"
339, Massachusetts Institute of Technology (MIT), Department of Economics.
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- James M. Poterba, 2001. "Taxation and Portfolio Structure: Issues and Implications," NBER Working Papers 8223, National Bureau of Economic Research, Inc.
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