Does inheritance taxation reform promote to build inexpensive rental housing?

•This paper investigates the impact of the inheritance taxation reform of 2015 in Japan on the rental housing market.•Using the difference-in-differences method, we found that the inheritance taxation reform decreased the housing rents of wooden or light steel-framed apartments by 1.3%.•Although the rental of slightly older housings belonging to the treatment group decreased, the rental of new housing belonging to the treatment group did not change. The inheritance taxation reform of 2015 in Japan substantially increased the amount of tax levied on large inheritances. This potentially served as a good incentive for people to build inexpensive low-rise apartments for tax savings, which increased the number of low-cost apartments. Therefore, this study investigates the effect of inheritance taxation reform on housing rents. Using the difference-in-differences method, we reveal that the inheritance taxation reform decreased the housing rents of wooden or light steel-framed apartments by 1.3%. Moreover, our results indicate that while the rental of slightly older housings belonging to the treatment group decreased, the rental of new housing belonging to the treatment group did not change.