The Effects of Land Transfer Taxes on Real Estate Markets: Evidence From a Natural Experiment in Toronto

Loading...
Thumbnail Image
Penn collection
Real Estate Papers
Degree type
Discipline
Subject
land transfer tax
property tax
land regulation
Economics
Real Estate
Taxation
Funder
Grant number
License
Copyright date
Distributor
Related resources
Author
Dachis, Ben
Duranton, Gilles
Turner, Matthew A
Contributor
Abstract

Taxes levied on the sale or purchase of real estate are pervasive but little studied. By exploiting a natural experiment arising from Toronto's imposition of a Land Transfer Tax (LTT) in early 2008, we estimate the impact of real estate transfer taxes on the market for single family homes. Our data show that Toronto's 1.1% tax caused a 15% decline in the number of sales and a decline in housing prices about equal to the tax. Relative to an equivalent property tax, the associated welfare loss is substantial, about $1 for every $8 in tax revenue. The magnitude of this welfare loss is comparable to those associated with better known interventions in the housing market. Unlike many possible tax reforms, eliminating existing LTTs in favour of revenue equivalent property taxes appears straightforward.

Advisor
Date Range for Data Collection (Start Date)
Date Range for Data Collection (End Date)
Digital Object Identifier
Series name and number
Publication date
2012-01-01
Journal title
Journal of Economic Geography
Volume number
Issue number
Publisher
Publisher DOI
Journal Issue
Comments
At the time of publication, Gilles Duranton was affiliated with the University of Toronto. Currently, he is a faculty member at the Real Estate Department at the University of Pennsylvania.
Recommended citation
Collection