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Home Tax Allowance for Younger People

  • András Giday


    (Budapest Enterprise Development Research Institute)

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    With regard to home ownership and mortgage lending in Western Europe in general three models are referred to; the main criterion for classification of the types is who the home is owned by and how great a role mortgage lending plays. In Hungary the higher than 90 per cent rate of homes inhabited by owners represents one of the extremes of the resident-owner model. The problem of this model is that if the costs of home acquisition have not been incorporated into wages, then newcomers can be excluded. Borrowing, on the other hand, can burden residents for decades. It is difficult to move out of settlements characterised by lower home prices. The problems in Hungary would be alleviated if the proportion of social tenement flats and market rental homes were to increase by 5–10 percentage points each. The potential number of those seeking market tenement flats is up to 8–10 per cent of the population. A portion of the potential landlords are deterred by the taxation and uncertain regulatory environment. Housing subsidies must be concentrated on those younger than 38–39 years of age, as they were unable to partake in the previous allowances. Among them the proportion of people living in their own home is much lower, and only half of young people have received a family subsidy toward the purchase of a home. In personal taxation a tax refund should be given, for which only younger people (born after 1972) could be eligible. The amount thereof should be limited depending on how many children they have, whether they owned a home in 2010, and whether there was a lien on it. The (proposed) targeted use of the tax allowance: home purchase (construction), the repayment of housing loans, and home rental.

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    Article provided by State Audit Office of Hungary in its journal Public Finance Quarterly.

    Volume (Year): 56 (2011)
    Issue (Month): 1 ()
    Pages: 17-26

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    Handle: RePEc:pfq:journl:v:56:y:2011:i:1:p:17-26
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