Affordable Housing, Community Development, Reports and Publications

Tax Policy Center Paper Challenges Status Quo

Tax Policy Center
 

A new paper suggests current tax provisions that are meant to support home ownership are lacking. The paper says that existing tax subsidies that allow deductions for mortgage interest and real property taxes “do little to encourage home ownership.”

Instead, the paper suggests five reform principles, including:

  1. Subsidize accumulation of home equity, not factors like mortgage debt. Given the current incentive of mortgage interest deduction to borrow more, it actually is a disincentive for wealth accumulation, one of the purported benefits of home ownership.
  2. Subsidize purchases of primary homes only, not second homes or home equity loans.
  3. Focus subsidies on households who are deciding between renting and buying.
  4. Do not disproportionately benefit taxpayers with higher incomes and tax rates.
  5. Take into account the high transaction costs of home buying and selling in designing homeownership subsidies.
 
 

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