Neutral property taxation under uncertainty

Jyh Bang Jou, Tan Lee

Research output: Contribution to journalArticlepeer-review


In a framework where no uncertainty arises, Arnott (J Publ Econ Theor 7:27-50, 2005) investigates a neutral property taxation policy that will not affect a landowner's choices of capital intensity and timing of development. We investigate the same issue, but allow rents on structures to be stochastic over time. We assume that a regulator implements taxation on capital, vacant land, and post-development property so as to expropriate a certain ratio of pre-tax site value as well as to achieve neutrality. We find that the optimal taxation policy is to tax capital and subsidize properties before and after development. We also investigate how this optimal policy changes in response to changes in several exogenous forces related to demand and supply conditions of the real estate market.

Original languageEnglish
Pages (from-to)211-231
Number of pages21
JournalJournal of Real Estate Finance and Economics
Issue number3
StatePublished - Oct 2008


  • Neutral property taxation
  • Real options
  • Tax revenues
  • Uncertainty


Dive into the research topics of 'Neutral property taxation under uncertainty'. Together they form a unique fingerprint.

Cite this