The Geography of Housing Subsidies

Yashar Blouri, Simon Büchler () and Olivier Schöni
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Yashar Blouri: University of Bern
Simon Büchler: Massachusetts Institute of Technology (MIT) - Center for Real Estate; University of Bern
Olivier Schöni: Laval University - Department of finance, insurance, and real estate

No 2, Working Papers from Massachusetts Institute of Technology, Center for Real Estate

Abstract: We investigate the heterogeneous impact of the US federal mortgage interest deduction (MID) on households’ location and tenure decisions. We develop a spatial general-equilibrium model at the county level featuring an endogenous itemization of housing subsidies. We ï¬ nd that repealing the MID decreases homeownership rates more strongly in central areas because owner-occupiers migrate to the countryside. Welfare increases because positive externalities arising from less congested housing markets and undistorted tenure decisions outweigh productivity losses. A MID repeal is preferred to an increase of standard tax deductions as implemented in 2018 by the Tax Cuts and Jobs Act.

JEL-codes: H2 H3 R1 R3 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2021-02
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