Implications of US tax policy for house prices, rents and homeownership by Kamila Sommer and Paul Sullivan
By: Sommer, Kamila
.
Contributor(s): Sullivan, Paul.
Material type: 
ArticlePublisher: 2018Subject(s): POLITICA FISCAL | VIVIENDA | ARRENDAMIENTO URBANO | PRECIOS | ESTADOS UNIDOS | MODELOS ECONOMETRICOSOnline resources: Click here to access online
In:
The American Economic Review v. 108, n. 2, February 2018, p. 241-274Summary: This paper studies the impact of the mortgage interest tax deduction on equilibrium house prices, rents, homeownership, and welfare. We build a dynamic model of the housing market that features a realistic progressive tax system in which owner-occupied housing services are tax-exempt and mortgage interest payments are tax-deductible. We simulate the effect of tax reform on the housing market. Eliminating the mortgage interest deduction causes house prices to decline, increases homeownership, decreases mortgage debt, and
improves welfare. Our findings challenge the widely held view that repealing the preferential tax treatment of mortgages would depress homeownership.
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This paper studies the impact of the mortgage interest tax deduction on equilibrium house prices, rents, homeownership, and welfare. We build a dynamic model of the housing market that features a realistic progressive tax system in which owner-occupied housing services are tax-exempt and mortgage interest payments are tax-deductible. We simulate the effect of tax reform on the housing market. Eliminating the mortgage interest deduction causes house prices to decline, increases homeownership, decreases mortgage debt, and
improves welfare. Our findings challenge the widely held view that repealing the preferential tax treatment of mortgages would depress homeownership.
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