Tax policy, housing markets, and elderly homeowners

This dissertation consists of three essays studying the impact of tax policy on housing markets and elderly homeowners. Chapter One examines the potential lock-in effect of capital gains taxation on home sales, using the Taxpayer Relief Act of 1997 (TRA97) as a policy instrument. Before 1997, homeowners were subject to capital gains taxation when they sold their houses unless they purchased replacement homes of equal or greater value. Since 1997, homeowners can exclude $500,000 of capital gains when they sell their houses. Using zip-code level housing price indices and sales data from 1982 to 2006 on single-family houses in 16 affluent towns within the Boston metropolitan area, I find that TRA97 reversed the lock-in effect for houses with low and moderate capital gains. However, the semiannual home sale rate of houses with capital gains above $500,000 declined after TRA97, suggesting that TRA97 generated an unintended lock-in effect for houses with capital gains over the maximum exclusion amount. Chapter Two studies the relationship between property taxes and elderly mobility. This is the first study using an instrumental variable approach to address the endogeneity problem associated with property taxes in analyzing elderly mobility. Using household-level panel data from the Health and Retirement Study (HRS) and a newly-collected dataset on state-provided property tax relief programs, I find evidence suggesting that higher property taxes raise mobility rates among elderly homeowners. Eligibility for relief programs lowers mobility rates, and the impact of these programs appears to vary with program types, program generosity, and implementation strategy.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Economics.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2008

Author dc:creator

• Shan, Hui, Ph. D. Massachusetts Institute of Technology

Advisor dc:contributor.advisor

• James M. Poterba and William C. Wheaton.

• Economics.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/43728

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/43728