Optimal housing taxation with land scarcity and maintenance: A Mirrleesian perspective
Year: 2025
Type: article
Abstract: We study optimal housing taxation in a Mirrleesian framework where individuals differ in both labor productivity and land ownership . Housing services are produced by combining scarce land with structures that require maintenance, which can be performed either in-house or through market purchases. We first characterize optimal allocations under information and resource constraints. We then restrict the government to the use of proportional housing taxes . Numerical simulations show that uniform taxation of land and structures is desirable only when political constraints prevent the imposition of very high land taxes . Otherwise, the optimal policy is to tax land at a much higher rate than structures, while still imposing a positive tax on structures to mitigate distortions from income taxation. A positive marginal tax on labor income incentivizes in-house over market-purchased maintenance. To prevent an inefficiently large reliance on in-house maintenance, optimal policy should generally subsidize market-purchased maintenance services.
Source: European Economic Review
Language: English
Topic: Housing Market and Economics
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,690
OpenAlex ID: W4411589705