Ander Iraizoz, Oxford University Centre for Business Taxation

This study examines the effects of property taxes on urban rental markets. We use rich Spanish administrative tax microdata that provide detailed information on taxpayers’ real estate holdings, allowing us to link property-level taxes to rental outcomes. Exploiting local variation in property tax payments across municipalities, we identify substantial effects of property taxation at both the extensive and intensive margins. First, property tax incentives increase the likelihood that secondary properties are rented out, leading to a greater supply of rental housing. Second, we find that the full burden of property taxes is passed on to tenants through higher rents. Finally, using detailed property-landlord-level data, we show that this rent pass-through is primarily driven by large property owners, particularly in tight rental markets.