The Geography of Housing Subsidies

62 Pages Posted: 17 Feb 2021

See all articles by Yashar Blouri

Yashar Blouri

University of Bern

Simon Buechler

MIT Center for Real Estate; University of Bern

Olivier Schöni

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

Date Written: February 1, 2021

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 find 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.

JEL Classification: R1, R3, H2, H3

Suggested Citation

Blouri, Yashar and Buechler, Simon and Schöni, Olivier, The Geography of Housing Subsidies (February 1, 2021). MIT Center for Real Estate Research Paper No. 21/05, Available at SSRN: https://ssrn.com/abstract=3784783 or http://dx.doi.org/10.2139/ssrn.3784783

Yashar Blouri

University of Bern ( email )

Gesellschaftsstrasse 49
Bern, BERN 3001
Switzerland

Simon Buechler (Contact Author)

MIT Center for Real Estate ( email )

United States

University of Bern ( email )

Gesellschaftsstrasse 49
Bern, BERN 3001
Switzerland
3001 (Fax)

Olivier Schöni

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

Pavillon Palasis-Prince, 2325 Rue de la Terrasse
Quebec, Quebec QC G1V 0A6
Canada

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