The Mortgage Interest Deduction and its Impact on Homeownership Decisions
AbstractThis paper examines the impact of the combined U.S. state and federal mortgage interest deduction (MID) on homeownership attainment, using data from 1984 to 2007 and exploiting variation in the subsidy across states, over time and due to inter-state moves. We test whether capitalization of the MID into house prices offsets the positive effect on homeownership. We find that the MID only boosts homeownership attainment of higher income households in less tightly regulated housing markets. In more restrictive places - typically larger coastal cities - an adverse effect exists. The MID is an ineffective policy to promote homeownership and improve social welfare.
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Bibliographic InfoPaper provided by Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0055.
Date of creation: Sep 2010
Date of revision:
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Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp
Homeownership; mortgage interest deduction; tax subsidies; land use regulation;
Find related papers by JEL classification:
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
- R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- How not to encourage home ownership
by Economic Logician in Economic Logic on 2010-12-28 17:05:00
- How to cut the charitable deduction without hurting charities
by Dylan Matthews in Ezra Klein's Wonkblog on 2012-11-15 16:50:46
- Bracke, Philippe & Hilber, Christian & Silva, Olmo, 2013. "Homeownership and Entrepreneurship: The Role of Commitment and Mortgage Debt," IZA Discussion Papers 7417, Institute for the Study of Labor (IZA).
- Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Spatial Economics Research Centre, LSE.
- Cole, Adam J. & Gee, Geoffrey & Turner, Nicholas, 2011. "The Distributional And Revenue Consequences Of Reforming The Mortgage Interest Deduction," National Tax Journal, National Tax Association, vol. 64(4), pages 977-1000, December .
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