Housing subsidy or parental support: crowding-out effect of mortgage tax deduction

Children may receive monetary transfers from their parents to realize the dream of homeownership. This raises the question of whether transfers received decrease if governments also provide a homeownership-related subsidy. The purpose of this paper is to empirically examine this question, using a sample of the Japanese home-buying households that are subsidized by a mortgage tax deduction (MTD) as a model case. In the empirical stage, we offer a test of the effect of the MTD on both the extensive (the probability of receiving transfers) and the intensive (the amount of transfers received) margins using the overall sample as well as subsample groups. The empirical results, which use the full sample, appear to indicate that the MTD has a tendency to crowd out transfers on both the extensive and the intensive margins. Subsample analysis demonstrates that the crowding-out effect is strengthened when parents\u27 behavior is influenced by a relatively strong altruistic motive and a relatively weak exchange motive

Housing assets and consumption among the Japanese elderly

A large proportion of the Japanese elderly have accumulated assets in the form of housing wealth. The elderly expect to fund consumption during their retirement by releasing housing equity. This paper estimates a fixed effects model to examine the causal effect of housing assets on consumption, using panel data of Japanese elderly households from 2006 to 2015. Contrary to the above expectation, the results suggest that changes in housing wealth do not significantly increase elderly consumption. The reason behind this result appears to be that the elderly homeowners cannot release part of their housing wealth as cash through the financial sector. Instead, elderly homeowners leave their housing assets to their children, and in exchange, receive cash to fund consumption. The impact on consumption, however, is rather small. Moreover, this mechanism tends to operate only in urban areas where the land values are relatively high. These results imply that housing wealth is available to only a limited proportion of Japanese elderly homeowners

Strategic interaction between inter vivos gifts and housing acquisition

To consider the policy event of a gift tax reduction earmarked for housing acquisition, the interdependence of parental gifts and children\u27s housing investments is modeled, considering an informal care issue behind such decision making. The empirical results, which use a sample of households who purchased a house in Japan, demonstrate that such a tax cut would appear to have the following limited effects on boosting housing investment in equilibrium. First, even though transfers are encouraged, they consequently reduce housing investment because the housing investment function is negatively related to gifts. Second, increments in housing investment are further discouraged because the slopes of the gift and housing investment functions have opposite signs

Housing subsidy or parental support: Crowding-out effect of mortgage tax deduction

Children may receive monetary transfers from their parents to realize the dream of homeownership. This raises the question of whether transfers received decrease if governments also provide a homeownership-related subsidy. The purpose of this paper is to empirically examine this question, using a sample of the Japanese home-buying households that are subsidized by a mortgage tax deduction (MTD) as a model case. In the empirical stage, we offer a test of the effect of the MTD on both the extensive (the probability of receiving transfers) and the intensive (the amount of transfers received) margins using the overall sample as well as subsample groups. The empirical results, which use the full sample, appear to indicate that the MTD has a tendency to crowd out transfers on both the extensive and the intensive margins. Subsample analysis demonstrates that the crowding-out effect is strengthened when parents' behavior is influenced by a relatively strong altruistic motive and a relatively weak exchange motive

Housing inheritance, financial assistance, and reciprocal interdependence

When adult children expect that their parents will bequeath residential property to them, they may show their appreciation by providing their parents with financial support. This paper theoretically and empirically examines this possibility. We adopt a simple noncooperative game framework with a Stackelberg equilibrium to examine the reciprocal interdependence between the propensity of housing inheritance and financial assistance when formal care affects decision-making. We use data from Japanese households to test this interaction. After considering both the censoring of financial transfers and the specification of inheritance propensity, which we control for using information on formal care, our empirical results suggest that the propensity to inherit the parental home has a significantly positive impact on the amount of transfers from children to their parents. Consequently, an implicit annuity contract in the form of an intrafamily reverse mortgage appears to exist in Japanese society. However, parents should ensure they convey to their children a high expectation of future housing inheritance to extract sufficient financial assistance for their current consumption needs

Strategic interaction between inter vivos gifts and housing acquisition

This paper models the interdependence of parental inter vivos gifts and children\u27s home purchases when informal care affects decision making. We use data from Japanese households who purchased a detached house in an urban area to test this strategic interaction. Considering both censoring and endogeneity of inter vivos gifts, which are identified by information on formal care, our preferred results demonstrate that inter vivos gifts do not significantly increase the purchase price of housing. Theory suggests that this occurs when informal care tends to be a heavy burden for children. However, subsample analysis of young home buyers indicates that the empirical results are consistent with the literature: children who receive parental gifts tend to purchase a higher-priced dwelling. One potential explanation is that relatively young adult children are less likely to take charge of care obligations, and accordingly, parental gifts are only expected to relax their liquidity constraints. Subsample analysis appears to indicate that the underlying motivation of parental gifts is influenced by the timing of children\u27s home purchase decisions

Measuring Long-term Effects of the Fukushima Daiichi Nuclear Power Plant Accident on Real Estate Prices

The Fukushima Daiichi Nuclear Power Plant accident was caused by the Great East Japan Earthquake in March, 2011. Widespread areas in eastern Japan were contaminated by the huge release of radioactive materials. We analyze the long-term effects of the accident on land prices by estimating the hedonic equation with regional fixed effects. Our estimation results show that the soil contamination by cesium-134/137 affected the surrounding land prices negatively; however, this effect disappeared after only one year. This implies that we should discreetly interpret the results in estimating the cost of the Fukushima nuclear accident by the hedonic approach