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The Spatial Distribution of Housing-Related Tax Benefits in the United States

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  • Joseph Gyourko
  • Todd Sinai

Abstract

Using 1990 Census tract-level data, we estimate how tax subsidies to owner-occupied housing are distributed spatially across the United States, calculating their value as the difference in taxes currently paid by home owners and the taxes owners would pay if there were no preference for investing in one’s home relative to other assets. The $164 billion national tax subsidy is highly skewed spatially with a few areas receiving large subsidies and most areas receiving small ones. If the program were self-financed on a lump sum basis, less than 20 percent of states and 10 percent of metropolitan areas would have net positive subsidies. These few metropolitan areas are situated almost exclusively along the California coast and in the Northeast from Washington, DC to Boston. At the state level, California stands out because it receives 25 percent of the national aggregate subsidy flow while being home to only 10 percent of the country’s owners. At the metropolitan area level, owners in just three large CMSAs receive over 75 percent of all positive net benefits.

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Paper provided by Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania in its series Zell/Lurie Center Working Papers with number 399.

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Handle: RePEc:wop:pennzl:399

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  1. Patric H. Hendershott & Joel Slemrod, 1982. "Taxes and the User Cost of Capital for Owner-Occupied Housing," NBER Working Papers 0929, National Bureau of Economic Research, Inc.
  2. Martin Feldstein, 1987. "The Effects of Taxation on Capital Accumulation," NBER Books, National Bureau of Economic Research, Inc, number feld87-1, octubre-d.
  3. James M. Poterba, 1983. "Tax Subsidies to Owner-occupied Housing: An Asset Market Approach," Working papers 339, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Yongheng Deng & John M. Quigley & Robert Van Order, 1995. "Mortgage Default and Low Downpayment Loans: The Costs of Public Subsidy," NBER Working Papers 5184, National Bureau of Economic Research, Inc.
  5. Edwin S. Mills, 1987. "Dividing up the investment pie: have we overinvested in housing?," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 13-23.
  6. Mervyn A. King, 1980. "An econometric model of tenure choice and demand for housing as a joint decision," NBER Chapters, in: Econometric Studies in Public Finance, pages 137-159 National Bureau of Economic Research, Inc.
  7. Bruce, Donald & Holtz-Eakin, Douglas, 1999. "Fundamental Tax Reform and Residential Housing," Journal of Housing Economics, Elsevier, vol. 8(4), pages 249-271, December.
  8. Richard K. Green & Patric H. Hendershott & Dennis R. Capozza, 1996. "Taxes, Mortgage Borrowing and House Prices," Wisconsin-Madison CULER working papers 96-06, University of Wisconsin Center for Urban Land Economic Research.
  9. Joseph Tracy & Henry Schneider & Sewin Chan, 1999. "Are stocks overtaking real estate in household portfolios?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 5(Apr).
  10. King, Mervyn A., 1980. "An econometric model of tenure choice and demand for housing as a joint decision," Journal of Public Economics, Elsevier, vol. 14(2), pages 137-159, October.
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Cited by:
  1. Persky, Joseph & Kurban, Haydar, 2003. "Do federal spending and tax policies build cities or promote sprawl?," Regional Science and Urban Economics, Elsevier, vol. 33(3), pages 361-378, May.

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