Friday 26 March 2021 13:00 - 14:30

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About this event

Using transaction records on housing sales and leases, we estimate the effect of Toronto’s imposition of a land transfer tax in 2008. We find two novel effects of an increase in land transfer tax: (1) a rise in buy-to-let transactions but a fall in owner-occupiers transactions despite the tax applied to both, (2) a fall in the price-to-rent ratio. We develop a housing search model with both ownership and rental markets to show that land transfer tax can generate lock-in effects both within the ownership market and across the two markets. It accounts for the two new facts by predicting a reduction in mobility within the ownership market, an increase in demand in the rental market, generating a fall in homeownership rate. The implied deadweight loss as a percentage of revenue raised is large at 45%, with half due to within ownership market and remaining half due to across the two markets.

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Directions

Urban and Regional Economics Seminars are part of the CEP's Urban and spatial programme.