The housing ladder, taxation, and borrowing constraints

Job Swank, J Kakes, AF Tieman

Research output: Working paperAcademic


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.
Original languageEnglish
Place of PublicationRotterdam
Publication statusPublished - 2002

Publication series

SeriesOcfeb Research Memorandum

Research programs

  • EUR ESE 02


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