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Old 07-27-2017, 09:06 AM
Location: Paranoid State
12,685 posts, read 9,438,208 times
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Originally Posted by Hollytree View Post
What are you a renter? Why would you argue against the best interests of homeowners?
No, I'm not a renter; I own several homes. But neither have I had a mortgage in decades.

As this is an economics forum, I thought it was an interesting topic. Perhaps you don't.
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Old 07-27-2017, 08:26 PM
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It seems to be obviously flawed. They hint at some effects of reducing the deduction. There appear to be sacrifices in home prices and size to maintain homeownership. The group most at risk has its deduction unchanged.

The study is a close look at a reform that Denmark enacted three decades ago, slashing the deduction for wealthy taxpayers but reducing it much less or not at all for others. In effect, this raised interest rates by 80 percent for the rich, 30 percent for the middle class, and not at all for those with lower incomes. The abrupt change in policy — applied to some taxpayers in Denmark but not others — allows the researchers to see how home-buying decisions changed in response.

The results? The effect on homeownership was about zero – an estimate that holds up through several different approaches to calculating it and is rather precise because the authors have an enormous data set. There is, however, “a clear effect of tax subsidies on the size and value of homes,” as well as on households’ interest expenses.

One limit here stems from the fact that the policy change focused on the wealthy and to a lesser extent the middle class. It’s possible that these folks will buy homes no matter what, while those lower on the income spectrum might buy or not depending on the subsidies available. It would be quite odd if subsidies couldn’t have any effect on homebuying no matter what, after all.

Last edited by lchoro; 07-27-2017 at 08:55 PM..
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