Property Taxes and Housing Allocation Under Financial Constraints (Coven, Golder, Gupta & Ndiaye, 2026)

Summary

"Property Taxes and Housing Allocation Under Financial Constraints," by Joshua Coven, Sebastian Golder, Arpit Gupta, and Abdoulaye Ndiaye, circulated as NBER Working Paper 35587 in August 2026 (DOI 10.3386/w35587). The paper asks a question the property-tax literature usually leaves implicit: who ends up living in the housing stock under different property-tax regimes? Its answer: "Low property taxes amplify lock-in among elderly homeowners, limiting housing access for young families."

Findings

The authors identify two mechanisms by which higher recurrent property taxes reallocate housing toward younger, financially constrained households:

• Price capitalization as embedded leverage. A recurring tax is capitalized into lower purchase prices, which directly reduces the downpayment a constrained young buyer must raise. The tax converts part of the price of housing from an upfront wealth hurdle into a pay-as-you-go flow — functioning, in the authors' framing, as embedded leverage for buyers who have income but not accumulated wealth.
• Holding costs on incumbents. The same recurring tax raises the annual cost of remaining in a large, high-value home, weakening the incentive for older owners to stay put in housing they no longer fully use.

In the paper's overlapping-generations model, raising California's property-tax rates to Texas levels increases young homeownership and decreases elderly homeownership. Eliminating the step-up basis at death (the inheritance provision that wipes out accrued capital-gains liability) would further reduce elderly homeownership — evidence that tax advantages to holding until death substantially prop up incumbent tenure.

Relation to the Georgist Case

This is the intergenerational-allocation version of a core Georgist argument: a low holding cost on valuable locations subsidizes incumbency and idle or under-intensive use, and a recurring levy on that value prices the location to its highest-value user. The paper's California-vs-Texas contrast is, in substance, a study of Proposition 13-style tax suppression: California's capped assessments are the canonical modern case of lock-in, long noted on this wiki's San Francisco and Silicon Valley pages, and the paper supplies a formal mechanism and quantified simulation for what those caps do to who gets to live in the housing stock.

It also cuts directly into the "asset-rich, cash-poor" objection. That objection frames the elderly owner facing a land-value tax as the sympathetic victim; this paper makes the distributional flip side explicit — the absence of a holding cost is itself a transfer, from young families priced out by higher upfront costs to incumbent owners whose tenure is subsidized. The Georgist reply to the objection (deferral converts the annual bill into a lien settled at sale) is compatible with both: deferral preserves the price-capitalization benefit to young buyers while removing the forced-move hardship.

Two honest limits. First, the paper studies the conventional property tax, which falls on buildings as well as land — its allocation results support recurrent taxation of real property generally, and only a fortiori (not directly) the land-only version. Second, the headline policy results are model-based simulations, not quasi-experimental estimates, and the paper is a working paper, not yet peer-reviewed.

Bears On

• Objection: LVT hurts the 'asset-rich, cash-poor' — quantifies the other side of the ledger: low holding taxes protect incumbent tenure at the direct expense of young families' access.
• Benefit (indirect support): LVT improves housing affordability — the price-capitalization-as-embedded-leverage mechanism is a distinct affordability channel: capitalized recurring taxes lower the wealth barrier to entry even holding supply fixed.
• Place: San Francisco · Silicon Valley — the Prop 13 lock-in these pages describe is the real-world regime the paper's California calibration captures.

See Also

• Cabral & Hoxby: The Hated Property Tax — why salient recurring property taxes are politically disfavored despite their efficiency properties
• Land Value Tax
• Objection: LVT hurts the 'asset-rich, cash-poor'

Sources

1. Joshua Coven, Sebastian Golder, Arpit Gupta & Abdoulaye Ndiaye (2026), "Property Taxes and Housing Allocation Under Financial Constraints," NBER Working Paper 35587 (August 2026). nber.org/papers/w35587 — abstract fetched and read 2026-08-14 — used for the lock-in headline claim, the two mechanisms (price capitalization as embedded leverage; holding costs on incumbents), the California-to-Texas simulation result, and the step-up-basis finding. Scan depth: abstract only (B-claims); the full paper is paywalled to this session, so no claim below the abstract level is made.