Taxing Vacant Apartments: Can fiscal policy reduce vacancy?

Mariona Segú attended Tuesday 15th of March at the Applied Economics Lunch Seminar in the Paris School of Economics. She presented the paper intituled “Taxing Vacant Apartments: Can fiscal policy reduce vacancy?”
 
Abstract:
The particular features of the housing market make the role of public policies crucial in reducing its imperfections. Public intervention can take different shapes and affect both supply and demand. In this paper, we focus on the empirical evaluation of a supply-sided fiscal policy: taxation of vacancy. We use the quasi-experimental setting of the implementation of a tax on vacancy in France in 1999 to identify the causal direct effect of the tax on the vacancy rate. Exploiting the exhaustive fiscal dataset of FILOCOM, that contains information on every dwelling in France from 1995 to 2013, we implement a Difference-in-Difference approach. The aim is to compare municipalities belonging to big urban units that were concerned by the tax in 1999 versus a control group constructed with municipalities also belonging to big urban units but that did not get the tax. The results we obtain suggest that the tax was responsible of a 15% decrease on vacancy between 1997 and 2001, with the impact being higher for more populated municipalities. Results are robust across the introduction of controls (fixed effects, linear time trend, coetaneous policies), sample reduction (only regions with both treatment and control municipalities) and econometric strategy (matching DiD). The effect is only significant for private apartments and not for social housing given that social institutions are not supposed to pay the tax. Results also suggest that most of the vacant apartments moved to primary residences. Moreover, in a vast majority of the cases, they do not change ownership and they were rented in a 60% of the cases. These results contradict the only previous study of the impact of a tax on vacancy that found a non-significant effect. In terms of policy implications,
these results indicate that a municipal tax on vacancy can play a role in shaping the incentives of the owners in the housing market.