We evaluate the welfare cost of ad valorem housing transaction taxes, focusing on the distortions in the matching of different houses with different households as the channel of welfare effects. We present a one-sided assignment model with imperfectly transferable utility, where households are heterogeneous by incomes, houses are heterogeneous by quality, and housing is a normal good. We calibrate the model with data from the Helsinki metropolitan region to assess the welfare

impact of a counterfactual tax reform, where the transaction tax is replaced by arevenue equivalent ad valorem property tax. The aggregate welfare gain would be modest at the current 2%, but the welfare cost of transaction taxation increases rapidly with the tax rate, with Laffer curve peaking at about 9%-11% rate.