The Geography of Housing Subsidies

Blouri, Yashar; Büchler, Simon; Schöni, Olivier (June 2019). The Geography of Housing Subsidies (CRED Research Paper 25). Bern: CRED - Center for Regional Economic Development

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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 generalequilibrium 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.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics > Economic Policy and Regional Economics
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics > Public Economics
11 Centers of Competence > Center for Regional Economic Development (CRED)

UniBE Contributor:

Blouri, Yashar; Büchler, Simon Camilo and Schöni, Olivier

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

CRED Research Paper

Publisher:

CRED - Center for Regional Economic Development

Language:

English

Submitter:

Melanie Moser

Date Deposited:

15 Apr 2020 10:58

Last Modified:

15 Apr 2020 10:58

Uncontrolled Keywords:

housing subsidies, residential location, tenure choice, housing supply

JEL Classification:

R1, R3, H2, H3

BORIS DOI:

10.7892/boris.142215

URI:

https://boris.unibe.ch/id/eprint/142215

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