Taxation and housing markets with search frictions (joint with M. Loberto) [2019]
Housing taxation is a main policy instrument shaping households choices about homeownership and renting as well as the evolution of the housing market. We study the effects of housing taxation in a model with search and matching frictions in the property market and a competitive rental market. We show a new transmission channel of a housing tax reform that works through a “shifting” of the tax burden on secondary homes from landlords to tenants through rental prices. Property taxation affects house prices not only through the change in the user cost but also via the impact on housing rental services, as measured by the rental prices. We calibrate the model in order to estimate the effects of the recent Italian housing market taxation reforms and the extent of property taxes capitalization in house prices. We show that property taxation on owner-occupied dwellings has a negative effect on property and rental prices, whereas taxes on secondary homes have qualitative opposite effects. The simultaneous increase of both these instruments may mitigate the dynamics of prices and rents as well as the change of the ratio between the share of owners and renters, determining a partial capitalization of taxation on prices.
With (more than) a little help from my bank. Loan-to-value ratios and access to mortgages in Italy (joint with V. Vacca) [2016]
This paper introduces a framework to jointly account for the affordability of the periodic repayment of the housing debt (income constraint) and of the initial deposit (budget constraint). An application to 2006-2012 micro-data on Italian households indicates that the improvement in the ability of the latter to sustain a mortgage was counterbalanced by a tighter budget constraint. The framework can be employed as a tool to assess the impact of macro-prudential policies – like caps on LtVs – on the pool of households who can actual access housing mortgages without running into financial distress: the level and the slope of the ‘mortgage af-fordability curve’, the curve that shows the share of eligible households at different LtVs provided by the banks, change over time and are affected by the definition of households’ wealth. The 2008-09 crisis lowered the share of eligible families at high LtVs and mildly increased it at lower LtVs. Moreover, we find that mortgage capability worsened more for the middle class and that the decline in Italian LtVs across the period was mainly supply driven, whereas households’ preferences barely changed. Finally, alternative policies affecting mortgage affordability display heterogeneous effects both in enlarging households’ market participation and in fostering safer lending policies.