Identifying the Effects of Tax Reform on Multifamily Rental Housing

Abstract

The construction of multifamily rental housing has declined substantially in the past few years and remains low. This paper investigates the rental housing market during the last 15 years or so to determine whether the Tax Reform Act of 1986 and, more generally, tax policy relating to rental housing are responsible for the current state of the rental housing market. Attention is focused on movements in rent indexes and multifamily construction in four metropolitan areas—Atlanta, Chicago, Dallas, and Oakland—for the period 1977 through 1990. The results suggest that rents are not sensitive to changes in tax policy; however, construction is sensitive. More generally, the analysis indicates that it is quite difficult to identify precisely the effects of tax policy on the rental housing market during the 1980s.