Property Tax Reform Could Shift Homeownership Between Generations
UKPulse Property Desk
A new paper suggests that increasing property taxes could reduce homeownership among over-65s and increase it for under-45s, by impacting house prices and annual bills.
- Increasing California's property tax rate from 0.8% to 2% could cut homeownership among over-65s by 6.2 percentage points.
- Such a change could also increase homeownership among under-45s.
- Every percentage point of a recurring property tax is modelled to reduce house prices by 23%.
A new paper highlights that low property taxes may contribute to older, wealthier individuals occupying large family homes while younger families rent. The research models the impact of raising California's property tax rate from 0.8% to 2%, similar to Texas levels.
This increase is projected to decrease homeownership among those over 65 by 6.2 percentage points, while simultaneously increasing it for those under 45. The underlying principle is that each percentage point of a recurring property tax could reduce house prices by 23%, making homes more affordable for young buyers and increasing annual costs for existing homeowners.
The UK faces a similar issue, with Council Tax based on 1991 valuations and Stamp Duty potentially deterring movers. A new report suggests replacing both with a single tax based on current property values.
Why this matters: The findings suggest that property tax policies could influence intergenerational homeownership patterns and housing affordability.
What this means for you: Proposed changes to property taxation, such as those suggested for the UK, could alter the upfront cost of buying a home and the annual tax burden for homeowners.