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The Geography of Housing Subsidies

Author

Listed:
  • Yashar Blouri, Simon B chler, Olivier Sch ni
Abstract
We investigate the spatially heterogeneous impact of the US federal mortgage interest deduction (MID) on the location and tenure decisions of households. We develop a general-equilibrium model at the county level featuring an endogenous itemization of housing subsidies. Despite being an important tax expenditure, repealing the MID would only slightly lower homeownership rates while leaving welfare mostly unchanged. The policy is ineffective because it targets locations with congested housing markets, creating a spatial shift of the housing demand toward areas that capitalize the subsidy into higher prices. We provide evidence that a repeal of the MID is to be preferred to an increase of standard tax deductions as recently implemented under President Trump's administration.

Suggested Citation

  • Yashar Blouri, Simon B chler, Olivier Sch ni, 2019. "The Geography of Housing Subsidies," Diskussionsschriften credresearchpaper25, Universitaet Bern, Departement Volkswirtschaft - CRED.
    • Handle: RePEc:rdv:wpaper:credresearchpaper25
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    References listed on IDEAS

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    More about this item

    Keywords

    housing subsidies; residential location; tenure choice; housing supply;
    All these keywords.

    JEL classification:

    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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