HOUSING TAX POLICY, RESIDENCE TIMES, AND THE COST OF MOVING

The impact of alternative housing tax policies has been examined many times in the past. However, with few exceptions, previous studies have focused on the long run impacts from a change in policy, without attempting to analyze the transition process from one steady state to another. To examine the transition process is difficult, because families cannot adjust their housing status in response to a policy change until they move to a new home. Since all households do not move every year, only by accounting for the moving process of households can the transition period following a change in housing policy be adequately addressed.;In the empirical analysis, the residence time model is used to examine the impact of changes in housing tax policy on the distribution of households between owner-occupied and rental housing. Results closely predict the distribution of owners and renters in the United States under the current tax regime, and provide important information about the long run and transitional effects from changes in housing tax policy. Additional analysis using hypothetical data, suggests that the moving process of households has important, though often counterintuitive effects on the time path of housing prices, per capita stocks of housing, and the amount of new construction following a tax change. These results further underscore the importance of incorporating residence times into the analysis of housing tax policies.;To account for the moving process of households, this dissertation develops a "residence time" model of housing markets which concentrates on the annual cohort of families actively searching for new housing (the movers), as well as the distribution of residence times among movers. By following cohorts of movers over time, it is possible to analyze the dynamic evolution of housing market equilibria. This approach provides an entirely new way of looking at housing markets, and makes it possible to study many questions previously unaddressed.