The housing ladder, taxation, and borrowing constraints
Using a multi-tier model of the housing market, we show that both starters and movers benefit from mortgage interest deduction for higher income groups. However, such tax favouring also tends to facilitate house price explosions, especially when interest rates and downpayment ratios are low. More in general, the efficiency of implicit tax subsidies to homeowners depends critically on the price responsiveness of new construction, which is found to differ strongly from country to country. Irrespective of supply conditions, running down mortgage interest deduction is likely to detract from the profits of lending institutions.
|Date of creation:||Jun 2002|
|Date of revision:|
|Contact details of provider:|| Postal: Postbus 98, 1000 AB Amsterdam|
Web page: http://www.dnb.nl/en/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
- Ortalo-Magne, Francois & Rady, Sven, 1999.
"Boom in, bust out: Young households and the housing price cycle,"
European Economic Review,
Elsevier, vol. 43(4-6), pages 755-766, April.
- Sven Rady, 1998. "Boom In, Bust Out: Young Households and the Housing Price Cycle," FMG Discussion Papers dp310, Financial Markets Group.
- Francois Ortalo-Magne & Sven Rady, 1998. "Boom In, Bust Out: Young Households and the Housing Price Cycle," Finance 9810004, EconWPA, revised 25 Oct 1998.
- François Ortalo-Magné & Sven Rady, 2002.
"Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints,"
Wisconsin-Madison CULER working papers
02-01, University of Wisconsin Center for Urban Land Economic Research.
- François Ortalo-Magné & Sven Rady, 2006. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints ," Review of Economic Studies, Oxford University Press, vol. 73(2), pages 459-485.
- Sven Rady & François Ortalo-Magné, 2001. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints," CESifo Working Paper Series 470, CESifo Group Munich.
- Ortalo-Magné, François & Rady, Sven, 2001. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints," CEPR Discussion Papers 3015, C.E.P.R. Discussion Papers.
- Ortalo-Magné, François & Rady, Sven, 2005. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraint," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 50, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Sven Rady, 2001. "Housing Market Dynamics: on the Contribution of Income Shocks and Credit Constraints," FMG Discussion Papers dp375, Financial Markets Group.
- William C. LaFayette & Donald R. Haurin & Patric H. Hendershott, 1995. "Endogenous Mortgage Choice, Borrowing Constraints and the Tenure Decision," NBER Working Papers 5074, National Bureau of Economic Research, Inc.
- James M. Poterba, 1984. "Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 99(4), pages 729-752.
- François Ortalo-Magné & Sven Randy, 2001. "Housing market dynamics: on the contribution of income shocks and credit constraints," LSE Research Online Documents on Economics 25049, London School of Economics and Political Science, LSE Library.
- Nakagami, Yasuhiro & Pereira, Alfredo M., 1996. "Budgetary and Efficiency Effects of Housing Taxation in the United States," Journal of Urban Economics, Elsevier, vol. 39(1), pages 68-86, January.
- DiPasquale, Denise, 1999. "Why Don't We Know More about Housing Supply?," The Journal of Real Estate Finance and Economics, Springer, vol. 18(1), pages 9-23, January.
- 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.
- Peter Linneman & Susan Wachter, 1989. "The Impacts of Borrowing Constraints on Homeownership," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 389-402.
- DiPasquale Denise & Wheaton William C., 1994. "Housing Market Dynamics and the Future of Housing Prices," Journal of Urban Economics, Elsevier, vol. 35(1), pages 1-27, January.
- Pain, Nigel & Westaway, Peter, 1997.
"Modelling structural change in the UK housing market: A comparison of alternative house price models,"
Elsevier, vol. 14(4), pages 587-610, October.
- Nigel Pain & Peter Westaway, 1996. "Modelling Structural Change In The UK Housing Market: A Comparison Of Alternative House Price Models," NIESR Discussion Papers 98, National Institute of Economic and Social Research.
- Dolado, Juan J & Jenkinson, Tim & Sosvilla-Rivero, Simon, 1990. " Cointegration and Unit Roots," Journal of Economic Surveys, Wiley Blackwell, vol. 4(3), pages 249-73.
- Hakfoort, Jacco & Matysiak, George, 1997. "Housing investment in the Netherlands," Economic Modelling, Elsevier, vol. 14(4), pages 501-516, October.
- Rosen, Harvey S., 1979. "Housing decisions and the U.S. income tax : An econometric analysis," Journal of Public Economics, Elsevier, vol. 11(1), pages 1-23, February.
- Topel, Robert H & Rosen, Sherwin, 1988. "Housing Investment in the United States," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 718-40, August.
When requesting a correction, please mention this item's handle: RePEc:dnb:mebser:2002-9. 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: (Rob Vet)
If references are entirely missing, you can add them using this form.