We study the effect of the transfer tax on household mobility using Finnish register data on the entire population in 2005-2016. In 2013, the transfer tax rate was increased from 1.5% to 2% for co-ops (shares in housing cooperatives), but remained unchanged at 4% for directly-owned houses. Using the differences-in-differences design, we find that the transfer tax has a signicant negative impact on household mobility. We complement the empirical analysis using a theoretical model which enables us to take into account spillovers between housing market segments through cross-segment mobility. Combining the two approaches implies a roughly 7% reduction in household mobility. Ignoring the spillovers would lead to a 20% underestimation of the negative effects of the transfer tax. Similar sources of bias may also be present in the previous empirical studies relying on treatment and control groups consisting of different segments of the same housing market.