Hilber, Christian A. L. and Turner, Tracy M.
The mortgage interest deduction and its impact on homeownership decisions.
SERC Discussion Papers,
Spatial Economics Research Centre (SERC), London School of Economics and Political Science, London, UK.
This paper examines the impact of the combined U.S. state and federal mortgage interest
deduction (MID) on homeownership attainment, using data from 1984 to 2007 and exploiting
variation in the subsidy across states, over time and due to inter-state moves. We test whether
capitalization of the MID into house prices offsets the positive effect on homeownership. We
find that the MID only boosts homeownership attainment of higher income households in less
tightly regulated housing markets. In more restrictive places – typically larger coastal cities –
an adverse effect exists. The MID is an ineffective policy to promote homeownership and
improve social welfare.
||© 2010 The Authors
|Library of Congress subject classification:
||H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
|Journal of Economic Literature Classification System:
||H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H22 - Incidence
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies
H - Public Economics > H7 - State and Local Government; Intergovernmental Relations > H71 - State and Local Taxation, Subsidies, and Revenue
R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R21 - Housing Demand
R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R31 - Housing Supply and Markets
R - Urban, Rural, and Regional Economics > R5 - Regional Government Analysis > R52 - Land Use and Other Regulations
||Departments > Geography and Environment
Research centres and groups > Spatial Economics Research Centre
Collections > Economists Online
||27 Jan 2011 10:55
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