The Housing Ladder, Taxation, and Borrowing constraints

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The Housing Ladder, Taxation, and Borrowing constraints

Author Info

J. Swank
J. Kakes
A.F. Tieman

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Abstract

Using a multi-tier model of the housing market, we show that both starters and movers benefit from mortgage interest deduction for higher income groups. However, such tax favouring also tends to facilitate house price explosions, especially when interest rates are low and LTV-ratios are high. More in general, the efficiency of implicit tax subsidies to homeowners depends critically on the price responsiveness of new construction, which is found to differ strongly from country to country. Irrespective of supply conditions, lending institutions are likely to lose by policies aimed at limiting the deductibility of mortgage interest payments. JEL Classification: G12; G21; H20; R31

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Paper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number 688.

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Date of creation: 2002
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Handle: RePEc:dnb:wormem:688

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Paper
- Job Swank & Jan Kakes & Alexander F. Tieman, 2002. "The housing ladder, taxation, and borrowing constraints," MEB Series (discontinued) 2002-9, Netherlands Central Bank, Monetary and Economic Policy Department. [Downloadable!]

This paper has been announced in the following NEP Reports:

NEP-ALL-2003-06-16 (All new papers)
NEP-URE-2003-06-16 (Urban & Real Estate Economics)

References listed on IDEAS
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.:

Hakfoort, Jacco & Matysiak, George, 1997. "Housing investment in the Netherlands," Economic Modelling, Elsevier, vol. 14(4), pages 501-516, October. [Downloadable!] (restricted)
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Other versions:
- François Ortalo-Magné & Sven Rady, 2005. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraint," Discussion Papers 50, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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Other versions:
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Poterba, James M, 1984. "Tax Subsidies to Owner-occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, MIT Press, vol. 99(4), pages 729-52, November. [Downloadable!] (restricted)
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- Nigel Pain and Peter Westaway, 1996. "Modelling Structural Change In The UK Housing Market: A Comparison Of Alternative House Price Models," NIESR Discussion Papers 98, National Institute of Economic and Social Research. [Downloadable!]
Owen Lamont & Jeremy C. Stein, 1999. "Leverage and House-Price Dynamics in U.S. Cities," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 498-514, Autumn. [Downloadable!] (restricted)
Other versions:
- Owen Lamont & Jeremy C. Stein, 1997. "Leverage and House-Price Dynamics in U.S. Cities," NBER Working Papers 5961, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Nakagami, Yasuhiro & Pereira, Alfredo M., 1996. "Budgetary and Efficiency Effects of Housing Taxation in the United States," Journal of Urban Economics, Elsevier, vol. 39(1), pages 68-86, January. [Downloadable!] (restricted)
DiPasquale Denise & Wheaton William C., 1994. "Housing Market Dynamics and the Future of Housing Prices," Journal of Urban Economics, Elsevier, vol. 35(1), pages 1-27, January. [Downloadable!] (restricted)
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William C. LaFayette & Donald R. Haurin & Patric H. Hendershott, 1995. "Endogenous Mortgage Choice, Borrowing Constraints and the Tenure Decision," NBER Working Papers 5074, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, 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.)

Wouter Vermeulen & Jan Rouwendal, 2007. "Housing supply in the Netherlands," CPB Discussion Papers 87, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
Wouter Vermeulen & Jan Rouwendal, 2007. "Housing Supply and Land Use Regulation in the Netherlands," Tinbergen Institute Discussion Papers 07-058/3, Tinbergen Institute. [Downloadable!]

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