The Housing Affordability Crisis: Property Tax as a Problem-Solver or Trouble-Maker

Abstract

The global housing affordability crisis has reached critical proportions in major cities like New York and Taipei, where soaring housing prices have placed immense pressure on homebuyers and residents. Governments worldwide are actively seeking effective solutions, with property tax emerging as a commonly employed approach due to the regulatory powers governments possess in tax systems. New York State initiated property tax caps in 2012, known as the levy cap, which restrained property tax levy growth to either 2% or the inflation rate. In contrast, Taipei City introduced distinct measures, namely the Hoarding Tax, in 2014, aiming to encourage property hoarders to release vacant units into the housing market. These divergent approaches raise critical questions: What motivated these cities to adopt such contrasting policies, and what are the outcomes in terms of housing affordability?

This dissertation contributes to the discourse by conducting semi-structured interviews, validating hypotheses through interrupted time series (ITS) and Difference-in-Differences (DID) analyses, and offering insights into the effectiveness of property tax caps at the regional or district level. Our quantitative models indicate the potential for property tax caps to raise housing prices, but the Hoarding Tax's intended objectives were not fully realized. Surprisingly, the Hoarding Tax did not effectively mitigate inflation and appeared to facilitate the transfer of the tax burden from sellers to homebuyers, leading to higher prices in most areas. This study contextualizes these findings within market, cultural, and governance factors unique to each case, offering comprehensive insights into policy effects and their underlying rationales, decisions, and multifaceted implications.