There are certain tax policies related to residential real estate that can impact markets notably. The limit on the SALT deduction was a big negative for housing markets around the US where home prices are much higher mostly due to expensive labor and land, combined with restrictive, complex zoning and regulation. Increased mansion and/or transfer taxes designed to generate more revenue often do the exact opposite by reducing the volume of activity.
Real estate taxes are a big issue in many parts: school taxes are often a big component of local taxation but those without kids often pick up a huge tab without any direct benefit, although great schools boost local real estate values. In areas that are in hyper-growth mode, investments in local infrastructure to keep up with growth are a challenge too. Often limits on how much real estate taxes can be raised each year for those who own already are deemed unfair to those who move in and have to pay higher taxes to compensate for this.....welcome stranger!
Capital Gains taxes are an issue for those who are in areas where the price of their homes have escalated notably, especially for those who have remained in the same home for many years (sometimes a good reason to move more frequently in an area with high home price escalations?). While many would argue that if you are making a huge profit on the sale of your home after the 250k deduction for singles or 500k deduction for couples, you should pay taxes on those excess profits. That is the theory.
The reality is often those people simply stay put, dying in their home and then benefitting from another tax policy.....the step-up.....that can allow you to bypass paying any capital gains taxes..... A step-up in basis resets the cost basis of an appreciated inherited asset for tax purposes. The cost basis for heirs is raised to the asset's market value on the prior owner's date of death, reducing future capital gains taxes.
Taxes are supposed to be designed for the 'greater good'. Often they are unfair to those in the 'middle' who seem to get few/no breaks or free-bees. Worse, sometimes the taxes with the best intentions deliver bad results. Inventory shortages are being influenced by many factors: under-building, those addicted to their low mortgage rates......and tax policies that dis-incentize a move.
