Mortgage Interest Deductions and Homeownership: An International Survey

Steven Bourassa, Donald Haurin, Patric Hendershott and Martin Hoesli

No 12-06, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: The aim of this paper is to review the international evidence on the impacts of mortgage interest deductions on homeownership rates. The probability of becoming a homeowner is a function of the relative cost of owning and renting, borrowing constraints, permanent household income, and a set of taste variables. The relative cost of owning and renting is in part a function of house prices and the annual user cost of owner-occupied housing. Tax policies affect the user cost of owner-occupied housing and, in turn, the probability of becoming a homeowner. They also affect the price of housing due to capitalization effects. We draw on a number of empirical studies that have been conducted for several countries in North America, Europe, Australasia, and Asia. The empirical evidence suggests that, contrary to popular wisdom, the MID generally does not increase the ownership rate. This result is likely due to the fact that the MID is capitalized into house prices, especially where housing supply is inelastic.

Keywords: homeownership; tax policy; house prices (search for similar items in EconPapers)
JEL-codes: G21 H2 R21 R31 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2012-02
New Economics Papers: this item is included in nep-pbe, nep-sea and nep-ure
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Citations: View citations in EconPapers (2)

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http://ssrn.com/abstract=2002865 (application/pdf)

Related works:
Journal Article: Mortgage Interest Deductions and Homeownership: An International Survey (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1206

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