Tax incentives and housing decisions: Effects of the Tax Cut and Jobs Act

Erik Hembre and Raissa Dantas

Regional Science and Urban Economics, 2022, vol. 95, issue C

Abstract: We investigate the 2017 Tax Cut and Jobs Act (TCJA) that altered the US tax code, greatly reducing itemization rates and effective homeownership subsidies. Using American Community Survey data and the NBER TAXSIM program, we estimate that the TCJA caused the average effective homeownership subsidy to decline 61% from $2,272 to $885. To uncover the TCJA's effects on homeownership and mortgage decisions, we use a simulated policy instrument that exploits state tax policy and housing market differentials. Comparing households that are similar in observable characteristics but vary in state exposure to the TCJA, we find that each percentage point decline in the effective homeownership subsidy rate lowered homeownership rates by 0.57 percentage point and mortgage use by 0.70 percentage point after the TCJA was enacted.

Keywords: Homeownership; Mortgage interest deduction; Housing finance (search for similar items in EconPapers)
JEL-codes: H2 R31 R38 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0166046222000400
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:95:y:2022:i:c:s0166046222000400

DOI: 10.1016/j.regsciurbeco.2022.103800

Access Statistics for this article

Regional Science and Urban Economics is currently edited by D.P McMillen and Y. Zenou

More articles in Regional Science and Urban Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().