Management, financing and taxation of housing stock in the shrinking cities of aging societies

Abstract

More than 11 million homes lie empty across Europe. More than 2 million homes are empty in each of France and Italy, 1.8 million in Germany and more than 700,000 in the UK. These figures show that a large share of the housing stock in Europe is not in use. The problem has arisen because policymakers did not develop proper tools to balance long-term supply and demand for housing. The article describes why this problem appeared and provides an answer to the question of what type of incentives policymakers should apply to housing stock management, financing and taxation to achieve a better utilization of the built environment. A housing stock is a form of inventory of a built environment. The value of housing stock represents the major part of inventories in each society. Such stock currently is not managed properly because the management of housing stock does not include the methods for forecasting demand according to the dynamics of age cohorts for different housing needs, preferences and purchasing power. The goal is to develop such tools. Therefore, the actuarial reverse mortgage approach to financing is combined with a graph of a multiple decrement-competing risk approach to achieve better forecasting of supply and demand and to show how tax policies influence the housing market and the inventory of empty homes. The article also shows how taxation of real estate transactions is eating into the housing equity of the elderly when the latter must change their residential property due to decreased functional capacity. Therefore, we conclude that taxation of transactions is not an age-friendly instrument and should be replaced by property taxes that are paid annually. A better taxation policy is also suggested for Spain.