Bequest Motives, Inheritance Tax, and Housing Choice : A Problem of Inefficient Empty Nests

The housing stock is underutilized in empty nests, which can be caused by the low mobility of elderly households and early renovations for their heirs. This study sheds light on the cause of inefficient empty nests by focusing on a bequest motive and inheritance tax. Japanese household panel data show that empty nests are more pronounced for elderly, non-moving, and renovating households. The motive to bequeath housing makes moving less likely but capacity-increasing renovations more likely. The motive to bequeath housing is influenced by the inheritance-tax benefit of housing in addition to income, wealth, and better housing structures. Thus, the inheritance-tax benefit of housing exacerbates a long-term empty nest problem by distorting housing choices