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The Geography of Housing Subsidies

Author

Listed:
  • Yashar Blouri

    (University of Bern)

  • Simon Büchler

    (Massachusetts Institute of Technology (MIT) - Center for Real Estate; University of Bern)

  • Olivier Schöni

    (Laval University - Department of finance, insurance, and real estate)

Abstract

We investigate the heterogeneous impact of the US federal mortgage interest deduction (MID) on households’ location and tenure decisions. We develop a spatial general-equilibrium model at the county level featuring an endogenous itemization of housing subsidies. We ï¬ nd that repealing the MID decreases homeownership rates more strongly in central areas because owner-occupiers migrate to the countryside. Welfare increases because positive externalities arising from less congested housing markets and undistorted tenure decisions outweigh productivity losses. A MID repeal is preferred to an increase of standard tax deductions as implemented in 2018 by the Tax Cuts and Jobs Act.

Suggested Citation

  • Yashar Blouri & Simon Büchler & Olivier Schöni, 2021. "The Geography of Housing Subsidies," Working Papers 0002, Massachusetts Institute of Technology, Center for Real Estate.
    • Handle: RePEc:bkc:wpaper:0002
    DOI: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3784783
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    More about this item

    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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