Inheritance Taxation Reform Distorts Rental Housing Market : Evidence from Japan

The inheritance taxation reform of 2015 in Japan substantially increased the amount of tax levied on large inheritances. This potentially served as a good incentive for people to build inexpensive low-rise apartments for tax savings, which increased the number of low-quality apartments and severely distorted the rental market. Therefore, this study investigates the effect of inheritance tax reform on housing rents. Using the difference-in-differences method, we reveal that the housing rents of wood or light steel-framed apartments decreased by 1.3% after the taxation reform. Moreover, our results indicate that while the rental of slightly older housings belonging to the treatment group decreased, the rental of new housing belonging to the treatment group did not change