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The mortgage interest deduction and its impact on homeownership decisions

Hilber, Christian A. L. and Turner, Tracy M. (2014) The mortgage interest deduction and its impact on homeownership decisions. Review of Economics and Statistics, 96 (4). pp. 618-637. ISSN 0034-6535

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Identification Number: 10.1162/REST_a_00427

Abstract

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 arising from changes in the MID within and across states over time. We test whether capitalization of the MID into house prices offsets the positive effect on homeownership. We find that the MID boosts homeownership attainment only of higher income households in less tightly regulated housing markets. In more restrictive places an adverse effect exists. The MID is an ineffective policy to promote homeownership and improve social welfare.

Item Type: Article
Official URL: http://www.mitpressjournals.org/loi/rest
Additional Information: © 2013 MIT Press
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
JEL classification: 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
Sets: Departments > Geography and Environment
Research centres and groups > Spatial Economics Research Centre
Date Deposited: 26 Apr 2013 12:19
Last Modified: 02 Nov 2017 15:28
URI: http://eprints.lse.ac.uk/id/eprint/49843

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