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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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:
Contact details of provider:
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, 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
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Karla Hoff & Arijit Sen, 2005.
"Homeownership, Community Interactions, and Segregation,"
American Economic Review,
American Economic Association, vol. 95(4), pages 1167-1189, September.
- Hoff, Karla & Sen, Arijit, 2004. "Homeownership, community interactions, and segregation," Policy Research Working Paper Series 3316, The World Bank.
- Hilber, Christian A.L., 2010.
"New housing supply and the dilution of social capital,"
Journal of Urban Economics,
Elsevier, vol. 67(3), pages 419-437, May.
- Hilber, Christian A. L., 2007. "New Housing Supply and the Dilution of Social Capital," MPRA Paper 5134, University Library of Munich, Germany.
- Christian A. L. Hilber, 2010. "New Housing Supply and the Dilution of Social Capital," SERC Discussion Papers 0042, Spatial Economics Research Centre, LSE.
- Hilber, Christian A. L., 2007. "New Housing Supply and the Dilution of Social Capital," MPRA Paper 11620, University Library of Munich, Germany, revised 14 Nov 2008.
- Green, Richard K. & Vandell, Kerry D., 1999. "Giving households credit: How changes in the U.S. tax code could promote homeownership," Regional Science and Urban Economics, Elsevier, vol. 29(4), pages 419-444, July.
- John M. Quigley & Steven Raphael, 2005.
"Regulation and the High Cost of Housing in California,"
American Economic Review,
American Economic Association, vol. 95(2), pages 323-328, May.
- Quigley, John M. & Raphael, Steven, 2006. "Regulation and the High Cost of Housing in California," Berkeley Program on Housing and Urban Policy, Working Paper Series qt3hh7s35m, Berkeley Program on Housing and Urban Policy.
- Todd Sinai & Joseph Gyourko, 2004. "The (Un)changing Geographical Distribution of Housing Tax Benefits: 1980 to 2000," NBER Working Papers 10322, National Bureau of Economic Research, Inc.
- Dietz, Robert D. & Haurin, Donald R., 2003. "The social and private micro-level consequences of homeownership," Journal of Urban Economics, Elsevier, vol. 54(3), pages 401-450, November.
- Martin Gervais & Manish Pandey, 2005.
"Who Cares about Mortgage Interest Deductibility?,"
University of Western Ontario, Economic Policy Research Institute Working Papers
20059, University of Western Ontario, Economic Policy Research Institute.
- Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, MIT Press, vol. 125(3), pages 1253-1296, August.
- Christian A. L. Hilber & Christopher J. Mayer, 2004. "Why Do Households Without Children Support Local Public Schools?," NBER Working Papers 10804, National Bureau of Economic Research, Inc.
- Wouter Vermeulen & Christian A.L. Hilber, 2012.
"The Impact of Supply Constraints on House Prices in England,"
CPB Discussion Paper
219, CPB Netherlands Bureau for Economic Policy Analysis.
- Christian A. L. Hilber & Wouter Vermeulen, 2012. "The Impact of Supply Constraints on House Prices in England," SERC Discussion Papers 0119, Spatial Economics Research Centre, LSE.
- Christian A. L. Hilber & Wouter Vermeulen, 2013. "The impact of supply constraints on house prices in England," Working Papers 2013/28, Institut d'Economia de Barcelona (IEB).
- Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
- James Poterba & Todd Sinai, 2008. "Tax Expenditures for Owner-Occupied Housing: Deductions for Property Taxes and Mortgage Interest and the Exclusion of Imputed Rental Income," American Economic Review, American Economic Association, vol. 98(2), pages 84-89, May.
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
- Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Spatial Economics Research Centre, LSE.
- 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).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.