Condominium Conversion and the Tax Reform Acts of 1969 and 1976

Condominium conversions became a major factor in housing markets durig the 1970s. The analysis presented in this paper suggests that rental housing investors are in high marginal tax brackets and use rental housing tax losses to shelter other income. These characteristics imply that rental housing tax benefits are an important determinant of rental housing investment. The Tax Reform Act of 1969 and 1976 reduced rental housing tax benefits and may have provided an important stimulus for the condominium conversions of the 1970s. Tax and survey data confirm the predicted characteristics of rental‐housing investors. Estimates of rental flows in Chicago from 1962 to 1977 indicate that the Tax Reform Act of 1969 and 1976 were possible causes of condominium conversions during the 1970s.