Allocation of real estate taxes

The impacts of real estate taxes on housing costs and economic inequality have become an increasingly important issue, as the importance of real estate taxation as a source of municipal tax revenue has increased. The development has been driven by increases in the range of real estate taxes by the central government, municipally enacted increases in municipal tax rates, and changes in the determination of tax values. It is currently unknown how these developments and future changes in real estate taxation will affect different income groups.

The aim of the project is to examine how real estate taxes affect housing prices (and rental rates, where applicable) in Finnish municipalities. In addition, the project examines how changes in real estate taxation affect different income groups when their impacts on prices and rents are taken into account. The project will be the first of its kind to utilise register data on real estate tax payments, which will be combined with data on housing sales and individual-level total data. 

The identification of housing price-related impacts makes use of the fact that changes in general real estate taxation do not apply to dwellings on rented plots. The impact of real estate taxation on housing prices can be reliably separated from other factors that affect prices by comparing the changes in the prices of similar dwellings on owned and rented plots with the changes in general real estate taxation rates. The project also compares the allocation of real estate taxes and the transfer tax.

Partners: Aalto University, London School of Economics

Responsible researcher: Teemu Lyytikäinen, [email protected], +358 295 519 431