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Tax Deductions, Tax Credits and the Homeownership Rate of Young Urban Adults in the United States

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  • Steven C. Bourassa

    (School of Urban and Public Affairs, University of Louisville, 426 W. Bloom Street, Louisville, Kentucky 40208, USA, steven.bourassa@louisville.edu, BEM Management School, 680 cours de la Libération, 33400 Talence, France)

  • Ming Yin

    (Southern California Association of Governments, 818 W. Seventh Street, 11th Floor, Los Angeles, California 90017, USA, yin.ming@gmail.com)

Abstract

The US President's Advisory Panel on Federal Tax Reform has recommended changes to income tax concessions for homeowners. Consistent with the opinions of many economists, the tax reform panel concluded that the existing tax concessions are not particularly effective. The housing and mortgage industry have opposed the reforms, in part due to a fear that the reforms will reduce the homeownership rate. In this paper, 1998 American Housing Survey data are used to estimate a tenure choice equation and to simulate hypothetical changes in tax concessions. Focusing on young households who are likely to be on the margin between renting and owning, it is concluded that the mortgage interest and property tax deductions reduce the homeownership rate for these households due to effects on house prices. The tax credit proposed by the Advisory Panel would be likely to have a similar effect.

Suggested Citation

  • Steven C. Bourassa & Ming Yin, 2008. "Tax Deductions, Tax Credits and the Homeownership Rate of Young Urban Adults in the United States," Urban Studies, Urban Studies Journal Limited, vol. 45(5-6), pages 1141-1161, May.
    • Handle: RePEc:sae:urbstu:v:45:y:2008:i:5-6:p:1141-1161
    DOI: 10.1177/0042098008089981
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    References listed on IDEAS

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    Cited by:

    1. Huber, Stefanie J. & Schmidt, Tobias, 2022. "Nevertheless, they persist: Cross-country differences in homeownership behavior," Journal of Housing Economics, Elsevier, vol. 55(C).
    2. Christian A. L. Hilber, 2017. "The Economic Implications of House Price Capitalization: A Synthesis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 45(2), pages 301-339, April.
    3. Stefanie J. Huber & Tobias Schmidt, 2016. "Cross-Country Differences in Homeownership: A Cultural Phenomenon?," ERES eres2016_47, European Real Estate Society (ERES).
    4. Dan Andrews, 2010. "Real House Prices in OECD Countries: The Role of Demand Shocks and Structural and Policy Factors," OECD Economics Department Working Papers 831, OECD Publishing.
    5. Cole, Adam J. & Gee, Geoffrey & Turner, Nicholas, 2011. "The Distributional and Revenue Consequences of Reforming the Mortgage Interest Deduction," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(4), pages 977-1000, December.
    6. Steven C. Bourassa & Chien-Wen Peng, 2011. "Why Is Taiwan’s Homeownership Rate So High?," Urban Studies, Urban Studies Journal Limited, vol. 48(13), pages 2887-2904, October.
    7. Christian A. L. Hilber & Tracy M. Turner, 2014. "The Mortgage Interest Deduction and its Impact on Homeownership Decisions," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 618-637, October.
    8. Hilber, Christian A. L., 2011. "The economics implications of house price capitalization a survey of an emerging literature," LSE Research Online Documents on Economics 58596, London School of Economics and Political Science, LSE Library.
    9. Wouter Vangeel & Laurens Defau & Lieven De Moor, 2024. "Influence of a Mortgage Interest Deduction on Homeownership Attainment of European Households," International Real Estate Review, Global Social Science Institute, vol. 27(1), pages 33-79.
    10. Bourassa, Steven & Hoesli, Martin & Scognamiglio, Donato, 2010. "Housing finance, prices, and tenure in Switzerland," MPRA Paper 45990, University Library of Munich, Germany.
    11. Hoa Nguyen, 2019. "Impact of Increasing Minimum Wage on Homeownership and Home Equity Loans," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 25(2), pages 209-219, May.
    12. Hilber, Christian A. L. & Schöni, Olivier, 2016. "Housing policies in the United Kingdom, Switzerland, and the United States: lessons learned," LSE Research Online Documents on Economics 72818, London School of Economics and Political Science, LSE Library.
    13. eccleston, richard & Verdouw, Julia & Flanagan, Kathleen & Warren, Neil & Duncan, Alan & Ong, Rachel & Whelan, Stephen & Atalay, Kadir & Hayward, Richard Donald, 2018. "Pathways to housing tax reform," SocArXiv 8xrbe, Center for Open Science.
    14. David E. Rappoport, 2016. "Do Mortgage Subsidies Help or Hurt Borrowers?," Finance and Economics Discussion Series 2016-081, Board of Governors of the Federal Reserve System (U.S.).
    15. Hongyan Chen & Jinping Song & Huaxiong Jiang, 2023. "Inequity in Housing Welfare: Assessing the Inter-City Performance of China’s Housing Provident Fund Program," Land, MDPI, vol. 12(3), pages 1-17, March.
    16. Dr. Anantha Raj A. Arokiasamy* & Dr. Sam Sarpong, 2019. "Exploring Customer Perceptions on Housing Loan: Evidence from the Malaysian Urban Community," The Journal of Social Sciences Research, Academic Research Publishing Group, vol. 5(8), pages 1193-1203, 08-2019.
    17. Joseph Teyu Chou & Chien-Hao Fu, 2022. "Which Families Benefited from the Recent Personal Income Tax Reform in Taiwan: Evidence from the Administrative Data," Journal of Family and Economic Issues, Springer, vol. 43(3), pages 433-451, September.
    18. Agustin Redonda, 2016. "Tax Expenditures and Sustainability. An Overview," Discussion Notes 1603, Council on Economic Policies.
    19. Binner, Amy & Day, Brett, 2015. "Exploring mortgage interest deduction reforms: An equilibrium sorting model with endogenous tenure choice," Journal of Public Economics, Elsevier, vol. 122(C), pages 40-54.

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