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Taxing Vacant Dwellings: Can fiscal policy reduce vacancy?

Segú, Mariona (2018): Taxing Vacant Dwellings: Can fiscal policy reduce vacancy?

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Abstract

Vacancy is a common phenomenon across developed countries. For policymakers, vacancy is undesirable as it challenges housing affordability, especially in large cities. The implementation of a tax on vacant housing is becoming a more popular tool among lawmakers, however this fiscal instrument has never been properly evaluated. This paper provides the first evaluation of a tax on vacant housing. First, I develop a model to understand the mechanisms of vacancy creation. Then, I use the quasi-experimental setting of the implementation of a tax on vacancy in France in 1999 to identify the causal direct effect of the tax on the vacancy rate. Exploiting an exhaustive fiscal data-set, which contains information on every dwelling in France from 1995 to 2013, I implement a Difference-in-Difference approach combined with a Propensity Score Matching strategy. Results suggest that the tax was responsible of a 13% decrease in vacancy rates between 1997 and 2001. The impact is specially concentrated in long-term vacancy. Results also suggest that most of the vacant dwellings moved to primary residences.

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