TY - UNPB
T1 - The housing ladder, taxation, and borrowing constraints
AU - Swank, Job
AU - Kakes, J
AU - Tieman, AF
PY - 2002
Y1 - 2002
N2 - Using a multi-tier model of the housing market, we show that both starters and movers benefit from mortgage interest deduction for higher income groups. However, such tax favouring also tends to facilitate house price explosions, especially when interest rates and downpayment ratios are low. More in general, the efficiency of implicit tax subsidies to homeowners depends critically on the price responsiveness of new construction, which is found to differ strongly from country to country. Irrespective of supply conditions, running down mortgage interest deduction is likely to detract from the profits of lending institutions.
AB - Using a multi-tier model of the housing market, we show that both starters and movers benefit from mortgage interest deduction for higher income groups. However, such tax favouring also tends to facilitate house price explosions, especially when interest rates and downpayment ratios are low. More in general, the efficiency of implicit tax subsidies to homeowners depends critically on the price responsiveness of new construction, which is found to differ strongly from country to country. Irrespective of supply conditions, running down mortgage interest deduction is likely to detract from the profits of lending institutions.
M3 - Working paper
T3 - Ocfeb Research Memorandum
BT - The housing ladder, taxation, and borrowing constraints
CY - Rotterdam
ER -