The mortgage interest deduction and its impact on homeownership decisions

Christian Hilber and Tracy Turner

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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 across states, over time and due to inter-state moves. We test whether capitalization of the MID into house prices offsets the positive effect on homeownership. We find that the MID only boosts homeownership attainment of higher income households in less tightly regulated housing markets. In more restrictive places – typically larger coastal cities – an adverse effect exists. The MID is an ineffective policy to promote homeownership and improve social welfare.

Keywords: homeownership; mortgage interest deduction; tax subsidies; land use regulation (search for similar items in EconPapers)
JEL-codes: H22 H24 H71 R21 R31 R52 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://eprints.lse.ac.uk/31759/ Open access version. (application/pdf)

Related works:
Journal Article: The Mortgage Interest Deduction and its Impact on Homeownership Decisions (2014)
Working Paper: The mortgage interest deduction and its impact on homeownership decisions (2014)
Working Paper: The Mortgage Interest Deduction and its Impact on Homeownership Decisions (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:31759

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