Taxing Vacant Apartments: Can fiscal policy reduce vacancy?

In this paper, we focus on the empirical evaluation of a supply-sided fiscal policy: taxation of vacancy. We use the quasi-experimental setting of the implementation of a tax on vacancy in France in 1999 to identify the causal direct effect of the tax on the vacancy rate. Exploiting an exhaustive fiscal dataset, which contains information on every dwelling in France from 1995 to 2013, we implement a matching Difference-in-Difference approach. The results we obtain suggest that the tax was responsible of a 13% decrease on vacancy between 1997 and 2001. This impact is twice as big for high populated municipalities. Results are robust to the introduction of controls, sample reduction and choice of control group. Results also suggest that most of the vacant apartments moved to primary residences. In terms of policy implications, these results indicate that a municipal tax on vacancy can play a role in shaping the incentives of the owners in the housing market.