Full Citation
Title: Property Tax Deferral: Can a Public/Private Partnership Help Provide Lifetime Income?
Citation Type: Working Paper
Publication Year: 2020
ISBN:
ISSN:
DOI:
NSFID:
PMCID:
PMID:
Abstract: Many retirees will not have enough money from conventional retirement programs to maintain their standard of living once they stop working. To help support themselves, they will need to tap their home equity, the major asset for most middle-income older households. Yet tapping home equity is difficult: most people are reluctant to downsize and, even when they do, they rarely reduce their housing expenses. Reverse mortgages are an option, but most households are put off by the enormity of the decision, the complexity of the product, and the high up-front costs. A statewide property tax deferral program overcomes the hurdles to accessing home equity. Property tax deferral does not provide access to as much home equity as a reverse mortgage, but the offsetting advantage is that some of the house value after the repayment of the loan and interest will be available for a bequest. At the household level, the proposed program is revenue-neutral: all taxes owed by a participating household are paid back, with interest sufficient to cover borrowing costs and administrative expenses. But because loans are made well in advance of repayments, the sponsor of the plan must cover start-up costs. In Massachusetts, if the state government simply borrowed money to cover the annual outlays, the state’s ratio of debt-to-GSP would rise from 14.0 percent to 15.1 percent. The alternative is to involve the private sector. This decision would raise the costs to homeowners, but nevertheless it may be necessary to get a broad-based program up and running.
Url: https://repository.upenn.edu/cgi/viewcontent.cgi?article=1681&context=prc_papers
User Submitted?: No
Authors: Munnell, Alicia H.; Hou, Wenliang; Walters, Abigail N.
Series Title: Wharton Pension Research Council Working Papers
Publication Number: 679
Institution: University of Pennsylvania
Pages:
Publisher Location:
Data Collections: IPUMS USA
Topics: Aging and Retirement, Housing and Segregation, Other
Countries: