Government Intervention in the Housing Market: Who Wins, Who Loses?
49 Pages Posted: 2 Apr 2010 Last revised: 18 Apr 2016
Date Written: April 17, 2016
Many U.S. government policies aim to encourage homeownership. We use a general equilibrium model with heterogeneous agents to consider the effects of temporary homebuyer tax credits and the asymmetric tax treatment of owner-occupied and rental housing on prices, quantities, allocations, and welfare. The model suggests that homebuyer tax credits temporarily raise house prices and transaction volumes, but have negative effects on welfare. Removing the asymmetric tax treatment of owner-occupied and rental housing can generate welfare gains for a majority of agents across steady states, but welfare impacts are substantially more varied along the transitions between steady states.
Keywords: Housing Market, Mortgage Interest Deductibility, Imputed Rents, Home Purchase Tax Credits, Policy Evaluation, Transition between Steady States
JEL Classification: C6, E21, E6, H21, R21
Suggested Citation: Suggested Citation