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Government intervention in the housing market: Who wins, who loses?

Max Floetotto, Michael Kirker and Johannes Stroebel
Authors registered in the RePEc Author Service: Max Flötotto ()

Journal of Monetary Economics, 2016, vol. 80, issue C, 106-123

Abstract: Many U.S. government policies aim to encourage homeownership. We use a general equilibrium model with heterogeneous agents to consider the effects of temporary homebuyer tax credits and the asymmetric tax treatment of owner-occupied and rental housing on prices, quantities, allocations, and welfare. The model suggests that homebuyer tax credits temporarily raise house prices and transaction volumes, but have negative effects on welfare. Removing the asymmetric tax treatment of owner-occupied and rental housing can generate welfare gains for a majority of agents across steady states, but welfare impacts are substantially more varied along the transitions between steady states.

Keywords: Housing; Mortgage interest deduction; Homebuyer tax credit; Welfare (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1016/j.jmoneco.2016.04.005

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