IDEAS home Printed from
   My bibliography  Save this article

Housing Market Distortions and the Mortgage Interest Deduction


  • Andrew Hanson

    () (Department of Economics, Marquette University, Milwaukee, WI, USA)

  • Hal Martin

    (Department of Economics, Georgia State University, Atlanta, GA, USA)


Housing market distortions from the mortgage interest deduction (MID) typically focus on a single choice measure such as home size or self-reported amount of debt on a new mortgage. We estimate the amount of mortgage interest deducted on federal tax returns to capture the full range of housing market distortions from the MID. Our primary results show that for every one percentage point increase in the tax rate that applies to deductibility, the amount of mortgage interest deducted increases by US$303 to US$590. Empirical estimates imply elasticities of mortgage interest deducted with respect to the after-tax cost of housing between −0.78 and −1.62, and deadweight loss estimates ranging from 16 to 36 percent of MID tax expenditure.

Suggested Citation

  • Andrew Hanson & Hal Martin, 2014. "Housing Market Distortions and the Mortgage Interest Deduction," Public Finance Review, , vol. 42(5), pages 582-607, September.
  • Handle: RePEc:sae:pubfin:v:42:y:2014:i:5:p:582-607

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Martin, Hal & Hanson, Andrew, 2016. "Metropolitan area home prices and the mortgage interest deduction: Estimates and simulations from policy change," Regional Science and Urban Economics, Elsevier, vol. 59(C), pages 12-23.
    2. Fatica, Serena & Prammer, Doris, 2017. "Housing and the tax system: how large are the distortions in the euro area?," Working Paper Series 2087, European Central Bank.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:42:y:2014:i:5:p:582-607. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.