Cover of EconPol Policy Brief 17

Macroprudential Measures and Taxation in the Housing Markets

Essi Eerola

The recent financial crisis and subsequent global recession have been followed by a wave of macroprudential measures in the housing market. At the same time, governments have a long tradition of conducting tax policies which encourage households to acquire owner-housing. These tax advantages may be at least partly responsible for the need to regulate borrowing. In terms of policy, the goal should be to identify instruments that reduce the negative effects of household leverage while minimizing the welfare costs to households. This EconPol policy brief examines the joint effects of the tax system and credit regulation.

Abstract

The recent financial crisis and subsequent global recession have been followed by a wave of macroprudential measures in the housing market. At the same time, governments have a long tradition of conducting tax policies which encourage households to acquire owner-housing. These tax advantages may be at least partly responsible for the need to regulate borrowing. In terms of policy, the goal should be to identify instruments that reduce the negative effects of household leverage while minimizing the welfare costs to households. Therefore, it seems important to look into the joint effects of the tax system and credit regulation.

Citation

Essi Eerola, Macroprudential Measures and Taxation in the Housing Markets, EconPol Policy Brief 17, April 2019.