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Government intervention in the housing market: Who wins, who loses?

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  • Floetotto, Max
  • Kirker, Michael
  • Stroebel, Johannes

Abstract

Many U.S. government policies aim to encourage homeownership. We use a general equilibrium model with heterogeneous agents to consider the effects of temporary homebuyer tax credits and the asymmetric tax treatment of owner-occupied and rental housing on prices, quantities, allocations, and welfare. The model suggests that homebuyer tax credits temporarily raise house prices and transaction volumes, but have negative effects on welfare. Removing the asymmetric tax treatment of owner-occupied and rental housing can generate welfare gains for a majority of agents across steady states, but welfare impacts are substantially more varied along the transitions between steady states.

Suggested Citation

  • Floetotto, Max & Kirker, Michael & Stroebel, Johannes, 2016. "Government intervention in the housing market: Who wins, who loses?," Journal of Monetary Economics, Elsevier, vol. 80(C), pages 106-123.
  • Handle: RePEc:eee:moneco:v:80:y:2016:i:c:p:106-123
    DOI: 10.1016/j.jmoneco.2016.04.005
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    References listed on IDEAS

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    Cited by:

    1. Bailey, Michael & D�vila, Eduardo & Kuchler, Theresa & Str�bel, Johannes, 2017. "House Price Beliefs And Mortgage Leverage Choice," CEPR Discussion Papers 12476, C.E.P.R. Discussion Papers.
    2. Elenev, Vadim & Landvoigt, Tim & Van Nieuwerburgh, Stijn, 2016. "Phasing out the GSEs," Journal of Monetary Economics, Elsevier, vol. 81(C), pages 111-132.
    3. Pedro Gete & Franco Zecchetto, 2018. "Distributional Implications of Government Guarantees in Mortgage Markets," Review of Financial Studies, Society for Financial Studies, vol. 31(3), pages 1064-1097.
    4. David Berger & Nicholas Turner & Eric Zwick, 2016. "Stimulating Housing Markets," NBER Working Papers 22903, National Bureau of Economic Research, Inc.
    5. Ambrose, Brent W. & Coulson, N. Edward & Yoshida, Jiro, 2018. "Reassessing Taylor rules using improved housing rent data," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 243-257.
    6. Yu, Shoujin & Zhang, Ling & Zeng, Yanni & Zhang, Hao, 2017. "Dual influences of regulatory polices on real estate enterprises’ investment —based on the perspective of supply-side reform in China," Finance Research Letters, Elsevier, vol. 23(C), pages 50-57.
    7. Hans Fehr & Maurice Hofmann, 2019. "Tenure Choice, Portfolio Structure and Long-Term Care - Optimal Risk Management in Retirement," CESifo Working Paper Series 7783, CESifo.
    8. Hamed Ghiaie & Jean-François Rouillard, 2018. "Housing Taxation and Financial Intermediation," Cahiers de recherche 18-01, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke, revised Nov 2018.
    9. Michael Bailey & Eduardo Dávila & Theresa Kuchler & Johannes Stroebel, 2017. "House Price Beliefs And Mortgage Leverage Choice," NBER Working Papers 24091, National Bureau of Economic Research, Inc.
    10. Liberati, Danilo & Loberto, Michele, 2019. "Taxation and housing markets with search frictions," Journal of Housing Economics, Elsevier, vol. 46(C).
    11. Zhou, Zhengyi, 2018. "Housing market sentiment and intervention effectiveness: Evidence from China," Emerging Markets Review, Elsevier, vol. 35(C), pages 91-110.
    12. Peter Shnurkov & Daniil Novikov, 2018. "Analysis of the problem of intervention control in the economy on the basis of solving the problem of tuning," Papers 1811.10993, arXiv.org.
    13. Davis, Morris A. & Van Nieuwerburgh, Stijn, 2015. "Housing, Finance, and the Macroeconomy," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 753-811, Elsevier.
    14. Zhu, Guozhong & Dale-Johnson, David, 2020. "Transition to the property tax in China: A dynamic general equilibrium analysis," Journal of Urban Economics, Elsevier, vol. 115(C).
    15. Leo Kaas & Georgi Kocharkov & Edgar Preugschat & Nawid Siassi, 2017. "Low Homeownership in Germany - A Quantitative Exploration," CESifo Working Paper Series 6775, CESifo.
    16. Floro, Danvee, 2019. "Testing the predictive ability of house price bubbles for macroeconomic performance: A meta-analytic approach," International Review of Financial Analysis, Elsevier, vol. 62(C), pages 164-181.
    17. Cóndor Richard, 2019. "Measuring the cost of U.S. housing policy," Working Papers 2019-08, Banco de México.
    18. Yi Wu & Yunong Li, 2018. "Impact of government intervention in the housing market: evidence from the housing purchase restriction policy in China," Applied Economics, Taylor & Francis Journals, vol. 50(6), pages 691-705, February.
    19. Zhao, Yunhui, 2016. "Got Hurt for What You Paid? Revisiting Government Subsidy in the U.S. Mortgage Market," MPRA Paper 81083, University Library of Munich, Germany, revised 01 Aug 2017.
    20. Hofmann, Maurice & Fehr, Hans, 2018. "Tenure Choice, Portfolio Structure and Long-term Care - Optimal Risk Management in Retirement," Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181517, Verein für Socialpolitik / German Economic Association.

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