Tax on Land Rent and Capital Housing: General Equilibrium Approach

In the absence of effective government in land and housing market and a high share of private sector in its interactions lead to non-optimal allocation of resources, demand speculation, land and housing price bubbles, reducing the purchasing power of households and increasing the share of housing costs. Thus, a tax on land rent can be reduced inefficiencies in land and housing market. In this study, analysis the economic impact of tax on land rent and capital housing in the framework of a general equilibrium model in Iran. Results from equilibrium of sensitivity model indicates that by increasing the tax rate on land rent and capital housing from zero to 25%, the equilibrium ratio of non-housing goods to housing demand increased from 1.364 to 1.423. Also, with same rate of tax on land rent and capital housing, the equilibrium ratio of capital to land demand to produce goods for housing equal 2.946 and constant. Finally, the equilibrium ratio of capital to land and labor demand to produce goods for non-housing increased from 7.422, 3.214 to 10.144 and 3.758 respectively.