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Effects of Preferential Tax Treatment on German Homeownership

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  • Stefanie Braun

Abstract

The paper analyzes the effects of mortgage interest deductibility and untaxed imputed rental income on the German homeownership. I use a general equilibrium life-cycle framework, where a minimum down-payment constraint on purchases of housing capital is the critical element of the model framework. I find that both tax policies would increase Germany's low homeownership rate. However, these tax policies would entail substantial welfare losses for individuals of all income quintiles in the long run. Finally, wealth e ects are relatively small and the welfare analysis shows that individuals would prefer to live in an economy without preferential tax treatment of housing.

Suggested Citation

  • Stefanie Braun, 2021. "Effects of Preferential Tax Treatment on German Homeownership," Working Papers 209, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:209_braun
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    File URL: https://bgpe.cms.rrze.uni-erlangen.de/files/2023/07/209_Effects-of-Preferential-Tax-Treatment-on-German-Homeownership.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    German homeownership rate; Housing taxation; Imputed rents; Mortgage deductibility; Capital accumulation;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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