Local Fiscal Pressure,Land Finance And The “Ratcheting Effect Of The House Price”

After the reform of the tax system,the financial pressure on local governments is gradually increasing,and there is an urgent need to find new ways for increasing revenue.The related taxes of land finance and real estate have gradually become the source of the steady financial revenue of local governments and the main taxes of local governments.Maintaining the scale of land finance and the prosperity of the real estate market are the main ways to ease the local financial pressure.Economic data show that since the housing monetization,housing prices showed a rapid upward trend,the rate of house price growth far exceeds the disposable income growth rate.In the face of irrational upward trend in house prices,the governments have promulgated many real estate market control policies.However,taking interest rates and investment as starting points,diverting social capital to avoid over-concentration of real estate industry is still based on the macroeconomic background of diffrent local conditions,failed to achieve the purpose of effective regulation and control.House prices rose rapidly after a brief convergence,and the more the higher the trend of adjustment,there is not only up or down the price of house prices rose slightly lower ratchet phenomenon.In response to the explanation of the reasons for the continuous rise of housing prices in China’s cities and towns,domestic scholars mainly discuss land finance,income level,housing price expectations and other factors and make many valuable attempts.However,it is not difficult to find in the data of local fiscal pressures and housing prices since housing monetization,that local fiscal pressures and housing prices are all on the rise.Among them,local fiscal pressures have been partially declining in the overall upward trend.Correspondingly,House prices continue to rise.Then has been neglected local financial pressure will have an impact on house prices? Land finance between the local financial pressure and the ratchet effect of price will show what kind of effect ? For the development of effective house price control policies,whether to consider the local financial pressure,whether the mechanism of land finance on house prices has regional differences?In this paper,the local government financial pressure,land finance and housing prices are placed in the same analytical framework,and use public choice theory and Turnbull model analysis of local government behavior affect the purpose and path of housing prices.Based on the panel data of China’s provinces from 1999 to 2014,taking into account the endogeneity,this paper systematically examines the mechanism of local governments’ fiscal pressure and land finance,which are the driving forces behind the ratcheting-up of housing prices in China.Moreover,in order to exclude the existing literature on the "government officials promotion assessment mechanism" may lead to the uncertainty of land finance,this paper uses causal relationship test to do further identification.The results show that: local governments to ease the financial pressure,there is motivation to increase land revenue,raise prices to obtain high real estate related taxes;local governments to increase the land transfer price,equivalent to raising real estate costs,indirectly raising prices,that is,local government financial pressure Not only to directly enhance the price,but also through the land finance solidified the ratchet price effect.On the basis of the above conclusions,taking into account the vast territory of our country,significant regional differences,according to the local characteristics of the development of housing price control policies,this paper uses sub-sample regression test of the local financial pressure on the role of land finance on housing prices in the eastern,middle and western regions.The results show that the financial pressure on local governments in eastern China is relatively slight,but the direct effect of local fiscal pressure on housing prices and the indirect effect of land finance on housing prices are more significant.The fiscal pressure on the local governments in the western region is relatively heavy,but the direct effect on house prices and the indirect effect on housing prices through land finance are weaker.The central government’s local fiscal pressure and the local financial pressure on housing prices directly affect the degree between the eastern and western regions,the local financial pressure through land finance indirect impact on housing prices are comparable with the eastern region.In view of the above findings,the following policy recommendations are made: First,reforming the fiscal and taxation system and opening up new channels for increasing revenue.We will deepen the reform of the fiscal and taxation system,improve the taxsharing system,achieve the balance of revenue and expenditure of local governments and reduce the pressure on local governments.In addition,taking advantage of the industrial structure in the eastern region to get rid of the real economy in the real estate kidnapping region,the central and western regions should try their best to find new ways to increase their financial revenue while seeking central transfer payments.Second,it strictly controls the power of land acquisition and supply and reforms the property rights of land and the compensation system of land acquisition.Standardize the dual monopoly power of local governments in land acquisition and land supply so as to gradually eliminate the dependence of local governments on land finance while allowing collectively owned land to enter the land exchange market and gradually decentralize the power in land circulation and reduce the costs of land transactions Rent-seeking space,according to the price of each region to give the corresponding level of land compensation fees.Third,to promote the property tax reform process and develop the housing rental market.We will increase the property tax rate for two or more units of housing and improve the policy of "renting the same ownership",and gradually promote it from the eastern part of China to other cities so as to ease the demand for housing and further combat the speculative purchase and curb the real estate bubble.