On 26 October 2023 the OECD published a study with the title Bricks, Taxes and Spending: Solutions for Housing Equity across Levels of Government. The study forms part of the OECD’s Fiscal Federalism Studies and sets out an analysis of ways in which housing inequities can be reduced.
Subnational governments have an important part to play in housing policy through social housing provision, land use regulation, and property taxes. The decentralization of housing responsibilities within governments gives a chance for local governments to find local solutions to housing problems. However, they need to coordinate measures with other levels of government.
If adequately designed measures are introduced in areas such as social housing investment and progressive property taxes this can help to create equitable housing markets. As the trend towards more remote working continues, integrated policy across levels of government is needed to ensure more affordable housing.
Policymakers need to take into account income inequality and the rising disparities in housing wealth. Property tax reforms may need to incorporate protections for lower-wealth homeowners. Any property tax reforms aiming to create more equity should consider the potential impact on lower-income homeowners.
Housing inequity can be made worse by regressive assessments and inadequate relief. This can impose unequal burdens on different groups of taxpayers. The regressivity of the system can be mitigated by reforms to property tax administration, the valuation of property for tax purposes and targeted relief programs. Comprehensive reforms will need coordination between the State and the localities.
Climate goals can be promoted while increasing housing affordability and equity if a progressive green land value tax is introduced. This could be implemented in phases while also providing protection for households that are asset rich but cash poor. A correctly designed, a green LVT could contribute to meeting housing and environmental policy objectives, but the design of the tax must take account of income levels and geographical differences.
Reforms should aim to align spending authority and tax incentives across the different levels of government. Attention should be paid to policy interactions between different levels of government.
There is a need for more research on policy effectiveness at reducing housing inequality in different countries. Measures taken by a government may not have the same impact in all regions and more international evidence is required to draw lessons from past policies. Equitable housing policy needs to take account of national and local perspectives and ensure that they are aligned. The result can be integrated policy approaches that are consistent across levels of government.
High housing costs can have a negative effect on the economy. They can discourage labour mobility towards areas where there are more jobs and opportunities. By regularly revising the boundaries of urban areas, coordinating governance, and ensuring that the regulations do not affect a flexible supply of housing, governments can improve the responsiveness of the market. Alignment of policy across the levels of government can maintain labour mobility in response to changing economic conditions.
