The geography of mortgage interest deductions

Bibliographic Data

ID11079421
AuthorsYashar Blouri (University of Bern), Simon C Büchler (0000-0003-1128-4240, Massachusetts Institute of Technology), Olivier Schöni (0000-0002-0877-0259, Swiss School of Public Health, corresponding author)
Year2023
Volume138
Pages103604
Publication date2023-11-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueJournal of Urban Economics (JOURNAL)
Journal identifiersISSN: 0094-1190 • E-ISSN: 1095-9068
PublisherElsevier BV (PUBLISHER)
DOI10.1016/j.jue.2023.103604
OpenAlexW4387630052
LanguageEN
Citations received2
References cited25

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 featuring non-homothetic preferences in which households can choose whether to claim the MID or a standard tax deduction. Repealing the MID decreases homeownership rates more strongly in central areas because owner-occupiers migrate to the countryside. Welfare increases slightly because positive externalities from less congested housing markets and undistorted tenure decisions outweigh productivity losses in central locations. An increase in standard tax deductions, as implemented in 2018 by the Tax Cuts and Jobs Act, leads to a similar welfare increase

Economics · Externality · Gross income · Homothetic transformation · Labour economics · Macroeconomics · Market economy · Microeconomics · Monetary economics · Productivity · Public economics · State income tax · Tax deduction · Tax reform · Welfare · Housing Market and Economics · Regional Economics and Spatial Analysis · Spatial and Panel Data Analysis

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