Government Intervention in the Housing Market: Who Wins, Who Loses?

49 Pages Posted: 2 Apr 2010 Last revised: 18 Apr 2016

Max Floetotto

Stanford University

Michael Kirker

University of Chicago - Department of Economics

Johannes Stroebel

New York University (NYU); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: April 17, 2016

Abstract

Many U.S. government policies aim to encourage homeownership. We use a general equilibrium model with heterogeneous agents to consider the effects of temporary homebuyer tax credits and the asymmetric tax treatment of owner-occupied and rental housing on prices, quantities, allocations, and welfare. The model suggests that homebuyer tax credits temporarily raise house prices and transaction volumes, but have negative effects on welfare. Removing the asymmetric tax treatment of owner-occupied and rental housing can generate welfare gains for a majority of agents across steady states, but welfare impacts are substantially more varied along the transitions between steady states.

Keywords: Housing Market, Mortgage Interest Deductibility, Imputed Rents, Home Purchase Tax Credits, Policy Evaluation, Transition between Steady States

JEL Classification: C6, E21, E6, H21, R21

Suggested Citation

Floetotto, Max and Kirker, Michael and Stroebel, Johannes, Government Intervention in the Housing Market: Who Wins, Who Loses? (April 17, 2016). Available at SSRN: https://ssrn.com/abstract=1582296 or http://dx.doi.org/10.2139/ssrn.1582296

Max Floetotto

Stanford University ( email )

Stanford, CA 94305
United States

HOME PAGE: http://www.stanford.edu/~maxf

Michael Kirker

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

HOME PAGE: http://michaelkirker.net

Johannes Stroebel (Contact Author)

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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