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The efficiency and distribution of mortgage revenue bond subsidies: The effects of behavioral responses

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  • Dan Durning

Abstract

Mortgage revenue bond (MRB) programs are frequently justified on the basis that they enable low- or moderate-income families to purchase houses that they otherwise could not afford. This article argues that evaluations of MRB programs must include estimates of the responses of buyers and sellers to the subsidies. The empirical evidence indicates that the behavioral responses reduce the efficiency of MRB programs (the amount of the subsidies provided to targeted households) and cause the subsidies to be distributed more inequitably than previous research has shown. The capitalization of 10% to 14% of the value of MRB subsidies diverts some of the program benefits to sellers. Horizontal inequities are created because one group of moderate-income households use the subsidies to purchase more housing services than unsubsidized households with the same incomes.

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  • Dan Durning, 1987. "The efficiency and distribution of mortgage revenue bond subsidies: The effects of behavioral responses," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 7(1), pages 74-93.
    • Handle: RePEc:wly:jpamgt:v:7:y:1987:i:1:p:74-93
    DOI: 10.2307/3323352
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    Cited by:

    1. Bree Lang & Ellen Hurst, 2014. "The Effect of Down Payment Assistance on Mortgage Choice," The Journal of Real Estate Finance and Economics, Springer, vol. 49(3), pages 329-351, October.
    2. Erik Hembre & Stephanie Moulton & Matthew Record, 2021. "Low‐Income Homeownership and the Role of State Subsidies: A Comparative Analysis of Mortgage Outcomes," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 40(1), pages 78-106, January.

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