Scandinavian Working Papers in Economics
Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy
No 2025:8: Optimal housing taxation with land scarcity andmaintenance: a Mirrleesian perspective
Spencer Bastani (), Sören Blomquist (), Firouz Gahvari (), Luca Micheletto () and Khayyam Tayibov ()
Additional contact information
Spencer Bastani: IFAU - Institute for Evaluation of Labour Market and Education Policy
Sören Blomquist: Department of Economics, Uppsala University
Firouz Gahvari: Department of Economics, University of Illinois at Urbana-Champaign
Luca Micheletto: Department of Law, University of Milan, and Dondena Centre for Research on Social Dynamics and Public Policy, Bocconi University; UCFS; CESifo
Khayyam Tayibov: Department of Economics and Statistics, School of Business and Economics, Linnaeus University, Sweden
Abstract: We study optimal housing taxation in a Mirrleesian framework where individuals differ in both labor productivity and land ownership. Housing services are produced by combining scarce land with structures that require maintenance, which can be performed either in-house or through market purchases. We first characterize optimal allocations under information and resource constraints. We then restrict the government to the use of proportional housing taxes. Numerical simulations show that uniform taxation of land and structures is desirable only when political constraints prevent the imposition of very high land taxes. Otherwise, the optimal policy is to tax land at a much higher rate than structures, while still imposing a positive tax on structures to mitigate distortions from income taxation. A positive marginal tax on labor income incentivizes in-house over market-purchased maintenance. To prevent an inefficiently large reliance on in-house maintenance, optimal policy should generally subsidize market-purchased maintenance services.
Keywords: Optimal taxation; housing capital; land; labor supply; maintenance
Language: English
21 pages, June 3, 2025
Full text files
wp-2025-8-optimal-ho...sian-perspective.pdfFull text
- IFAU - Institute for Evaluation of Labour Market and Education Policy
- Ordering Working Papers
- Home page for this series
Questions (including download problems) about the papers in this series should be directed to Ali Ghooloo ()
Report other problems with accessing this service to Sune Karlsson ().
RePEc:hhs:ifauwp:2025_008This page generated on 2025-06-05 15:32:41.