Housing taxes are of growing importance given the pressure on governments to raise revenues, improve the functioning of housing markets, and combat inequality. As they emerge from the COVID-19 pandemic, many countries are looking to restore public finances by raising tax revenues while supporting the economic recovery. Many governments are also under increasing pressure to address rising inequality and declining housing affordability, which is more acutely affecting low-income and young households. In addition, in the context of growing international mobility of both capital and people, governments may aim to raise more revenues from less mobile tax bases, in particular real estate. This increased attention on housing taxes reinforces the need to design them effectively and fairly.

Housing plays a central role in our lives. Access to shelter is a basic human need and a key determinant of individual welfare. Access to well-located, quality housing shapes people’s social lives as well as their access to health care, education, job opportunities and recreational activities. Housing also affects well-being on a daily basis as the home is the centre of family life and increasingly of professional life, with the widespread adoption of teleworking during the COVID-19 pandemic. In OECD countries, housing is on average the single-largest expenditure item across all income groups and has accounted for an ever-larger share of total household expenditure in recent years.

The chapter examines current trends and challenges in OECD housing markets, providing background for the subsequent policy analysis in the report. It covers trends in house prices and affordability, housing supply and demand dynamics, the role of housing in the economy, its equity implications and the impact of housing on the environment. The chapter also briefly discusses the longer-term trends that are likely to shape the future of housing.

The chapter examines how housing wealth and liabilities are distributed across households with different levels of income and wealth and across households of different ages and generations. The chapter also discusses the role of inheritances and gifts in the acquisition of housing. The findings in this chapter inform the policy assessments and reform options outlined in the remainder of the report.

This chapter provides an overview and an assessment of housing taxes in OECD countries. It covers the wide range of taxes that are commonly levied on housing in the OECD and examines their design from an efficiency, an equity and a revenue perspective. It also looks at the role of specific tax policies in addressing current housing market challenges. The chapter outlines a number of options for reform that governments could consider to enhance the design and functioning of their taxes on housing.