Property Tax and Tenure Choice : Implications for China

This paper examines real property tax as a determinant of tenure choice. The analysis is conducted in two stages. First, parameter estimates for a reduced-form homeownership model are obtained through multivariate analysis of data drawn from the U.S. Survey of Income and Program Participation (SIPP). Second, data from the Chinese Household Income Project (CHIP) is used to obtain predicted homeownership for China using the SIPP-based model. Actual and predicted values of homeownership in China are presented, and the marginal effect of property tax is computed. Overall, we find tenure choice is significantly influenced by property tax, even after controlling for a wide range of supply and demand considerations. Furthermore, and in the case of China, we show that the negative impact of property tax on homeownership may be mitigated by corresponding ownership incentives (e.g., tax policy). To our knowledge, this is the first paper to explicitly analyze property tax in this regard. Implications based on the empirical analysis are applicable to the evolution of China's property tax policy