The housing system’s multidimensionality as well as its multi-factor influence make it complex and highly sensitive to policies [1]. Moreover, the sustainability challenges imposed by a rapidly changing global socio-economic structure (such as globalization and financialization) may not be dispensed by orthodox policy instruments that cannot make housing environmentally sustainable and affordable to all [2]. Moreover, the housing system makes policies sensitive to human wellbeing. Therefore, policies developed and implemented without an integrated approach may fail to achieve their desired objectives [3].

The literature to date has identified several factors affecting the adoption of housing sustainability. These factors are generally based on household behavior, socio-economic conditions, geography, environment, policy, and policy instruments. The policy instruments include financial, monetary, and regulatory measures to manage consumption and public services, and to regulate market activities to meet socio-economic and environmental objectives [4,5]. However, the multilateral and dynamic nature of governance objectives and instruments used make it challenging to achieve an optimum and sustainable outcome [6,7]. For instance, the quality of public services, environmental ambiance, and energy efficiency play a key role in property values. These values are judged against housing cost and availability, which influences real estate market activities [8,9,10]. Thus, this poses another policy challenge in balancing local economic objectives and housing affordability. Furthermore, housing regulations are not just limited to offsetting the cost and supply of housing market interventions through market control and providing subsidies; they also affect housing rent, energy consumption, and efficiency [7,11].

Housing markets are exposed to exogenous and endogenous factors subject to socio-economic policy interaction at upper and lower tiers of governance. There is considerable literature on tax competition between municipalities in response to constraints imposed by central government [12]. However, most studies have contextualized outcomes due to geographic variances and the combination of variables used to assess policy outcomes. For instance, Lyytikäinen [13] studied the impact of property tax competition between taxed and non-taxed local governments resulting from the tax reforms imposed by the central government of Finland. However, the study was focused on the federal government restricting municipalities’ property tax rates. Housing policy is a provincial mandate, limiting local government influence on public services through property taxation in the Canadian context. Policy jurisdiction implies policy integration between upper and lower tiers of governance that relies on governance structure and contextual setting. Furthermore, tax implications and concurrent policies, such as a policy response to central or provincial regulations at the local scale, are essential areas of research that require more emphasis [12].

In addition to policy integrational challenges, geographic and demographic differential outcomes add to the complexity of the relationship between housing policies and the housing market. Per several researchers [14,15,16,17], housing policy outcomes will have a spatial disparity and spillover effect due to the difference in market characteristics, homeownership status, and timing and choice of policy delivery mode. Therefore, the complexity of the housing system advocates intraregional and localized scales of assessment of housing policies [18,19].

Researchers [20,21] have theorized on the housing system and policy configurations under liberal and social-democratic regimes. However, such theories still lack some contemporary factors such as financialization [22], market regulation, and environment, which are all considered significant factors of change in the housing system [23]. Furthermore, the net outcome of the regulatory policies is highly contextualized in terms of local connections, policy configuration, obligations, and local capacity [24,25]. The interaction between housing affordability and housing regulations at the inter-metropolitan scale is a crucial research domain that lacks emphasis [26,27].

Housing-related global, societal, and policy issues are becoming a significant concern for policymakers and academia [30]. The core of this issue is rising housing costs surpassing household income increase [31]. Housing affordability, particularly for starters, has become a significant concern in recent years [32,33]. According to United Nations Habitat, more than 880 million people around the globe live in slums. The situation worsens with a shortage of houses; for instance, in South Asian countries, thirty-eight million homes are required to meet the demand [34]. Similarly, 440 households worldwide—1.6 billion people—will be struggling for suitable housing by 2025 [35]. Moreover, rising urbanization, economic disparities, and environmental challenges make it hard to provide adequate, suitable, affordable, and sustainable housing for all.

In terms of housing sustainability, the housing market is influenced by how sustainability is defined, driving factors, policy objectives, and the way demand and supply are managed in response to housing market activities [36,37]. For instance, in Canada, the core aspects of sustainable housing are adequacy, suitability, and affordability [38]. However, these objectives can only be achieved through balancing social, environmental, and economic goals to achieve overall sustainable housing development [39].

Governments around the world use various policies to address housing sustainability. Their goals are energy efficiency, reducing carbon emissions, addressing urban sprawl and the connection between housing and mobility, housing affordability, and reducing social and health inequalities [40]. However, some conflict between objectives, such as the environmental standard of houses, energy consumption, and affordability, are considered a significant barrier to progress [41]. Additionally, economic and planning policies shape housing costs and socio-economic disparity across residential spaces and tenures [42].

The research acknowledges that housing is sensitive to varying institutional and policy structures influenced unevenly across scales and population geographies [2]. Therefore, a relationship between governing policies, the housing market, and housing affordability is crucial. For example, an interaction between housing affordability measures and planning regulations [26,27,43] and managing energy consumption and housing cost through taxes [4,5,6,44,45,46]. However, economic and development policies are driven under different regimes. As discussed above [20,21], theories about the housing system and policy configurations lack speculative investment for the sake of profit [22] and government response to regulate speculative investment impacts the housing disproportionately [23]. Therefore, it is worth investigating the behavior of housing markets under varying regulatory measures intended to influence house prices.

Real estate and property taxation literature contains mixed opinions about the relationship between property-related tax policies and house prices. Some researchers [47,48,49,50,51] have found taxation policies helpful in curbing house prices, whereas some have not [52,53,54,55]. The disparity in conclusions is mainly due to a difference in the combination of variables used, study setting, research design, and tax policies analyzed. Research suggests that the net outcome of policies would depend on a combination of taxation policies applied, their scope, and demographic and geographic variation.

The real estate and property taxation literature considers tax policies from two major perspectives: policies impacting transfer of ownership and policies impacting the user’s cost of housing. The former, which is applicable on the housing transaction link, implies tax payable when transferring ownership or policies restricting investing in secondary residential properties. The latter form of policies relates to the retention of houses, usually recurring and applicable to housing value, or in the form of tax incentives such as mortgage tax credits. These taxes on the retention of housing directly impact the user’s cost of housing.

Previous studies have adopted various approaches to determine the influence of taxation on house price volatility. Most studies have used policies related to transaction or retention links of housing and aggregate national-scale data to assess policy implications on housing prices [56,57]. In addition, they have either framed the analysis in the context of market distortion [47,49,52,58,59], analyzing investment behavior [60,61], or cost–value analysis [62,63]. Many empirical studies have indicated that both transaction and transfer links have significant explanatory power for price differences before and after the implementation of taxes. However, limited studies [57,64] have adopted the aggregate impact of both forms of tax policies and have analyzed price variation between cities. Furthermore, national- and provincial-scale aggregate data, ignoring intercity demand and supply heterogeneity, will limit the strength of a conclusion [53,65]. Additionally, considering the importance of geographic variation, the tax policy impact beyond its administrative jurisdiction is one of the vital aspects that remains under-researched.

Studies conducted to assess the retention taxes have framed their analysis in the context of cost capitalization [16,56] and impact variation [66,67,68] due to variation in population income level, tenure status, investment choice, and service value. The aggregate outcome of these policies is not uniform. For instance, housing purchase subsidies may contribute to driving up real estate prices [69]. Similarly, mortgage tax credit in the United States is meant to facilitate homeownership. However, many researchers believe that the mortgage tax credit policy is inefficient and somewhat counterproductive [70]. The literature shows that instead of price capitalization, a mortgage tax credit limit reduction decreases house prices [10,71,72]. This is mainly due to the increasing cost of housing ownership, which reduces investment interest in a secondary home. In contrast, primary homeowners are more concerned with house prices than with homeownership costs [73].

Furthermore, the policy measure impacts differently across population income tiers, housing tenure status, and spatial variations [66,70,73]. Mortgage tax credit facilitates the rich more than the poor. It is believed that incentivizing retention cost encourages secondary house investment, speculates house prices, and promotes inequality. Similarly, recurrent property taxes implemented by local governments to fund public services are highly dependent on the quality of services provided. The relationship between tax rate and public service expenditure determines the quality of public goods [50,56]. However, the impact of property taxes on house prices may cause a differential outcome. Increased property taxes with low-value public goods may negatively impact house prices. This may lead to population sorting, encouraging people to move to either low-taxed areas or communities with quality public goods to compensate for additional user cost of housing [66,74]. Subsequently, neighborhoods with high-value public services increase housing demand, resulting in increased house prices [62,75]. Therefore, an aggregate impact of retention taxes and incentives is driven by a cumulative user cost, service value, and household income that varies geographically.

The literature on transfer taxes has no definitive answer to the effectiveness of transaction policing in curbing house prices. As per some researchers [47,48,49], transfer taxes efficiently control house prices, whereas, for others [52,53,55], there is a positive correlation between transfer taxes and house prices. However, there is a consensus on the stimulus behavior of taxes on the transaction link, creating market distortion in the short run [52,58,59]. Most of these studies have used short-term or event analysis to assess the impact of transfer tax on house prices, ignoring long-term and integrated impact at the regional scale. In general, property-related taxes might be significant in the short run, but they are not driving housing demand in the long run [76]. This means that investment decisions may not be affected by property-related taxes if the benefit outweighs the cost [55,61,77]. In these circumstances, price speculation is the most crucial factor driving the housing market. Policies controlling drivers of housing speculation, such as taxing secondary home investments or capital gain from property flipping, are also ineffective unless restrictions are imposed on executing such investment moves [78]. Wei et al. [55] concluded that house prices do not react to the conventional market asymmetric volatility phenomenon. They are primarily driven by past trends and speculation about future price growth. The effectiveness of tax regimes relies on the combination of real estate and housing policies. Agrawal et al. [12] emphasized that a singular approach to policy assessment, ignoring local response to the federal constraints, would limit its relevance to determining the effectiveness of the policy outcome. Subsequently, single-ended measures will not be adequate in achieving house price control objectives [79].

In addition to a combination of tax policies, geographical variation of tax instruments, qualification, and spillover effect will alter the aggregate outcome [80]. Very few studies have attempted to assess the aggregate outcome of policies on retention and transfer links of housing transactions [57,61,80]. However, studies that have attempted cumulative assessment were limited to one city or multiple cities from geographically disconnected regions. No studies were found regarding evaluating market response to housing policies within and beyond policy jurisdiction in geographically related areas.