This report addresses housing inequities through a series of analytical chapters and case studies. The cross-country chapters examine the effects of the COVID-19 pandemic on housing demand, develop a proposal for a green land value tax, evaluate the dynamics between fiscal autonomy and housing supply responsiveness, as well as explore the drivers of inter-regional migration. The case studies unravel the changes of Korea's progressive national property tax and a programme to address regional imbalances, assess the impact of the US property tax system on housing, dive into Norway's property taxation in relation to inequality, as well as survey Belgium's approaches to housing policy. With a blend of empirical data and critical analysis, the report underscores the pressing need for comprehensive strategies in addressing housing inequities. It also offers insights for policymakers and scholars, highlighting the complex balance between national and local housing policies.
Bricks, Taxes and Spending
Abstract
Executive summary
This volume of OECD Fiscal Federalism Studies provides analysis and evidence on ways to reduce housing inequities. The chapters develop insights regarding intergovernmental fiscal relations and how to resolve certain key policymaking trade-offs, delving into the following:
Changes in urban geography due to the COVID-19 pandemic;
The impact of increased inequality on property tax receipts and housing outlays;
Korea’s history of progressive property taxation;
The effect of the local US property tax on housing affordability and equity;
The pros and cons of introducing a green land value tax;
Fiscal autonomy and boosting housing supply;
Housing policy and housing inequality;
Inter-regional migration and housing costs.
Chapter 1: Rising housing costs have made homeownership unaffordable for many low-income households across the OECD. Subnational governments play major roles in housing policy through social housing provision, land use regulation, and property taxes. Greater decentralization of housing responsibilities creates opportunities for tailored local solutions but requires coordination across levels of government. Well-designed reforms in areas like social housing investment, dense zoning near transit, and progressive property taxes can promote affordable and equitable housing markets. Policymakers should pursue integrated approaches that balance competing efficiency, sustainability, and equity objectives. Effective affordable housing strategies require thoughtful policy design along with close collaboration between national and subnational governments.
Chapter 2: The COVID-19 pandemic appears to have accelerated a shift in housing demand away from urban cores toward suburban and rural areas with more indoor and outdoor space. Using novel data, this chapter explores these demand changes, finding larger shifts in cities with high pre-pandemic price disparities, better suburban amenities, and stricter pandemic restrictions. Policy flexibility that allows housing supply to respond smoothly to changing demand patterns is beneficial. However, more research is needed to better understand post-pandemic shifts and inform responsive policy frameworks. As remote work persists, aligned policy reforms across levels of government will be essential to promote housing affordability.
Chapter 3: In Norway, increased income inequality does not affect property tax revenues or housing spending, but greater housing wealth inequality raises both. This contrasts with other evidence that income inequality drives property tax changes. The results indicate that different inequality types have distinct effects on housing policies. Policymakers seeking to address housing affordability should account for impacts of not just income inequality but also rising disparities in housing wealth. Property tax reforms may need to incorporate protections for lower-wealth homeowners. Holistic affordable housing strategies require considering multiple channels through which inequality affects housing.
Chapter 4: Korea’s progressive National Property Tax aims for equity but lags in underlying property valuations undermine effectiveness. More regular revaluations aligned with market prices could improve fairness and economic efficiency. Tax burden shifts between land and buildings may encourage housing development as well. Property tax reforms should weigh potential impacts on lower-income homeowners. Effectively designed reforms also require coordination across levels of government. There are opportunities to improve the equity and housing market impacts of Korea's property tax system through revaluation, coordination, and balanced policy design.
Chapter 5: In the United States, property taxes raise housing costs but may support affordability if capitalised into prices. Inequitable administration, regressive assessments, and inadequate relief worsen unequal burdens. Systemic reforms to property tax administration, valuation, and relief alongside targeted policies could mitigate regressivity. Equitable access to homeownership necessitates modernizing outdated property tax systems while expanding targeted relief programs. State and local coordination is essential for coherent, comprehensive reforms.
Chapter 6: A progressive green land value tax (LVT) could reconcile climate goals with housing affordability and intergenerational equity objectives. Regular reassessments based on land values avoid speculation and volatility. Protections for asset-rich, cash-poor households are vital. Phasing in LVT implementation while linking unpaid tax liability to future home sales can facilitate a measured transition. If thoughtfully designed, a green LVT could meet multiple housing and environmental policy objectives. But successful implementation requires balancing priorities across generations, income levels, and geography.
Chapter 7: Greater local control over housing spending reduces supply elasticity, while increased local property tax autonomy raises it, likely by incentivizing development. Balancing local knowledge with revenue motivations can improve supply responsiveness and affordability. Aligning spending authority and tax incentives across government levels should be part of comprehensive housing reform strategies. Effective affordable housing policies require attending to policy interactions between different levels of government.
Chapter 8: In Belgium, national housing policies like transaction tax cuts have highly variable local impacts on housing inequality. Enhancing data granularity could help better target future reforms to assist disadvantaged neighbourhoods. International evidence remains limited on policy effectiveness at reducing housing inequality, pointing to an important research need. The local nature of housing means even national measures may affect regions unequally.
Chapter 9: Korea’s balanced national development plan may have inadvertently increased local housing inequality by restricting supply in popular areas. Metropolitan coordination powers and property tax reforms could improve local responsiveness. Truly equitable housing requires aligning national and local perspectives. Korea's experience highlights the need for integrated policy approaches spanning all levels of government.
Chapter 10: High housing costs discourage migration towards jobs and opportunities. Regularly updating urban boundaries, coordinating governance, and balancing regulations with flexible supply can improve housing market responsiveness. However, place-based supports remain important to assist prospective movers and stayers. Policy alignment across government levels is essential to enable mobility in response to changing economic conditions. Removing barriers to efficient housing markets should be paired with place-based and transitional supports.
