IDEAS home Printed from https://ideas.repec.org/p/wrk/warwec/1439.html
   My bibliography  Save this paper

Tax and Occupancy of Business Properties : Theory and Evidence from UK Business Rates

Author

Listed:
  • Lockwood, Ben

    (University of Warwick and Oxford University Centre for Business Taxation)

  • Simmler, Martin

    (Oxford University Centre for Business Taxation and Thuenen Institute of Rural Economics)

  • Tam, Eddy H.F.

    (King's College London and Oxford University Centre for Business Taxation)

Abstract

We study the impact of commercial property taxation on vacancy rates and rents in the UK, using a new data-set, and exploiting exogenous variations in property tax rates from reliefs in the UK system: small business rate relief (SBRR), retail relief and empty property relief. We estimate that the retail relief reduces vacancies by 85%, and SBRR relief by up to 49%, while empty property exemption increases them by up to 89%. The effect of retail relief on clusters of urban properties (the "High St") is no different to its overall effect. SBRR increases (decreases) the likelihood that a property is occupied by a small (large) business. We also use data on asking prices for rental properties to study the effect of reliefs on rental rates. Rental rates move in the opposite direction to vacancy rates, except in the case of empty property relief. All these findings are consistent with a novel model of directed search in the commercial property market, also presented in the paper.

Suggested Citation

  • Lockwood, Ben & Simmler, Martin & Tam, Eddy H.F., 2022. "Tax and Occupancy of Business Properties : Theory and Evidence from UK Business Rates," The Warwick Economics Research Paper Series (TWERPS) 1439, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:1439
    as

    Download full text from publisher

    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/2022/twerp_1439_-_lockwood.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David Card & Andrew Johnston & Pauline Leung & Alexandre Mas & Zhuan Pei, 2015. "The Effect of Unemployment Benefits on the Duration of Unemployment Insurance Receipt: New Evidence from a Regression Kink Design in Missouri, 2003-2013," American Economic Review, American Economic Association, vol. 105(5), pages 126-130, May.
    2. Danielle C. Sanderson & Victoria M. Edwards, 2014. "What Tenants Want: UK occupiers' requirements when renting commercial property and strategic implications for landlords," Real Estate & Planning Working Papers rep-wp2014-03, Henley Business School, University of Reading.
    3. Shouyong Shi, 2002. "A Directed Search Model of Inequality with Heterogeneous Skills and Skill-Biased Technology," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(2), pages 467-491.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lockwood, Ben & Simmler, Martin & Tam, Eddy H. F., 2022. "Tax and Occupancy of Business Properties: Theory and Evidence from UK Business Rates," CAGE Online Working Paper Series 648, Competitive Advantage in the Global Economy (CAGE).
    2. Ben Lockwood & Martin Simmler & Eddy H.F. Tam & Benjamin Lockwood, 2023. "Tax and Occupancy of Business Properties: Theory and Evidence from UK Business Rates," CESifo Working Paper Series 10252, CESifo.
    3. Kyle Herkenhoff & Lee Ohanian, 2019. "The Impact of Foreclosure Delay on U.S. Employment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 63-83, January.
    4. Chen, Yi & Zhao, Yi, 2022. "The timing of first marriage and subsequent life outcomes: Evidence from a natural experiment," Journal of Comparative Economics, Elsevier, vol. 50(3), pages 713-731.
    5. David S. Lee & Pauline Leung & Christopher J. O’Leary & Zhuan Pei & Simon Quach, 2021. "Are Sufficient Statistics Necessary? Nonparametric Measurement of Deadweight Loss from Unemployment Insurance," Journal of Labor Economics, University of Chicago Press, vol. 39(S2), pages 455-506.
    6. Miana Plesca, 2010. "A General Equilibrium Evaluation of the Employment Service," Journal of Human Capital, University of Chicago Press, vol. 4(3), pages 274-329.
    7. Lester Lusher & Geoffrey C. Schnorr & Rebecca L.C. Taylor, 2022. "Unemployment Insurance as a Worker Indiscipline Device? Evidence from Scanner Data," American Economic Journal: Applied Economics, American Economic Association, vol. 14(2), pages 285-319, April.
    8. David M. Arseneau & Brendan Epstein, 2018. "Efficient Mismatch," Finance and Economics Discussion Series 2018-037, Board of Governors of the Federal Reserve System (U.S.).
    9. Krebs, Tom & Scheffel, Martin, 2016. "Structural Reform in Germany," IZA Discussion Papers 9787, Institute of Labor Economics (IZA).
    10. Auster, Sarah & Gottardi, Piero, 2019. "Competing mechanisms in markets for lemons," Theoretical Economics, Econometric Society, vol. 14(3), July.
    11. Michael A. Clemens, 2022. "The effect of seasonal work visas on native employment: Evidence from US farm work in the Great Recession," Review of International Economics, Wiley Blackwell, vol. 30(5), pages 1348-1374, November.
    12. Xiaoming Cai & Pieter Gautier & Ronald Wolthoff, 2021. "Search, Screening and Sorting," Working Papers tecipa-699, University of Toronto, Department of Economics.
    13. Suren Basov & John Ian King & Lawrence Uren, 2010. "The Employed, the Unemployed, and the Unemployable: Directed Search with Worker Heterogeneity," Working Papers 2010.03, School of Economics, La Trobe University.
    14. Cai, Xiaoming & Gautier, Pieter A. & Wolthoff, Ronald P., 2017. "Search frictions, competing mechanisms and optimal market segmentation," Journal of Economic Theory, Elsevier, vol. 169(C), pages 453-473.
    15. Hochmuth, Brigitte & Kohlbrecher, Britta & Merkl, Christian & Gartner, Hermann, 2021. "Hartz IV and the decline of German unemployment: A macroeconomic evaluation," Journal of Economic Dynamics and Control, Elsevier, vol. 127(C).
    16. Jackson, Paul, 2023. "Equilibrium underemployment," Labour Economics, Elsevier, vol. 81(C).
    17. Schmieder, Johannes F & Trenkle, Simon, 2020. "Disincentive effects of unemployment benefits and the role of caseworkers," Journal of Public Economics, Elsevier, vol. 182(C).
    18. Camarero Garcia, Sebastian & Hansch, Michelle, 2020. "The effect of unemployment insurance benefits on (self-)employment: Two sides of the same coin?," ZEW Discussion Papers 20-062, ZEW - Leibniz Centre for European Economic Research.
    19. Albert Jan Hummel, 2021. "Unemployment and tax design," Tinbergen Institute Discussion Papers 21-061/VI, Tinbergen Institute.
    20. Hornstein, Andreas & Krusell, Per & Violante, Giovanni L., 2005. "The Effects of Technical Change on Labor Market Inequalities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 20, pages 1275-1370, Elsevier.

    More about this item

    Keywords

    Commercial Property ; Vacancy ; Occupancy ; Property Taxation JEL Codes: H25 ; H32 ; R30 ; R38;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wrk:warwec:1439. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Margaret Nash (email available below). General contact details of provider: https://edirc.repec.org/data/dewaruk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.