Metropolitan area home prices and the mortgage interest deduction: Estimates and simulations from policy change

Martin, Hal; Hanson, Andrew

doi:10.1016/j.regsciurbeco.2016.03.006

Cited by 21 publications

(9 citation statements)

References 19 publications

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“…Our fourth alternative scenario assumes an uncompensated price elasticity of demand of –0.8. This is in line with Poterba () as well as Martin and Hanson (), according to whom this value represents a ‘middle‐of‐the‐road view of demand elasticity’ among the different estimates available in the literature. In our setting with smaller‐than‐unity supply elasticities, a higher elasticity of demand for housing services translates into higher excess demand and higher deadweight loss for all countries.…”

Section: Simulation Resultssupporting

confidence: 88%

“…The third scenario considers a different expected rate of house price appreciation. We follow Martin and Hanson () and use a correction coefficient of 0.4 to convert historical appreciation rates into net anticipated appreciation rates . This implies that the contribution of the appreciation rates to the user cost is lower (in absolute value).…”

Section: Simulation Resultsmentioning

confidence: 99%

“…Berkovec and Fullerton, ; Gervais, ; Arrondel and Savignac, ; Chetty, Sándor and Szeidl, ; Martin and Hanson, .…”

mentioning

confidence: 99%

“…For example, Albouy and Hanson () and Martin and Hanson () use the elasticities estimated by Saiz () using local geological features for the US metropolitan areas.…”

mentioning

confidence: 99%

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Housing and the Tax System: How Large Are the Distortions in the Euro Area?^*

Fatica

Prammer

2018

Fiscal Studies

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This paper presents new evidence on the impact of the preferential treatment of owner-occupied housing in the euro area. We find that tax benefits to homeowners reduce the user cost of housing capital by almost 40 per cent compared with the efficient level under neutral taxation. On average, the tax subsidy translates into an excess consumption of housing services equivalent to 7.8 per cent of the value of owner-occupied housing, or about 30 per cent of financial asset holdings in household portfolios. The bulk of the subsidy stems from undertaxation of the return to home equity, while the average contribution of the tax rebate for mortgage interest payments is driven down by relatively low loan-to-value ratios in the data. However, at the margin, the tax-induced *

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Section: Simulation Resultssupporting

confidence: 88%

Section: Simulation Resultsmentioning

confidence: 99%

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Housing and the Tax System: How Large Are the Distortions in the Euro Area?^*

Fatica

Prammer

2018

Fiscal Studies

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“…While there is a large literature on the effects of the mortgage interest deduction (and, to a lesser extent, the local property tax deduction), 1 relatively little attention is paid to the potential consequences of reform for the housing market. This study is conducted in the spirit of Martin and Hanson (2016), who simulate price changes resulting from previous proposals for reforming the mortgage interest deduction (MID) in a similar framework at the metropolitan level for a 1 Studies on the MID's effects on efficiency and consumer choice in various dimensions such as tenure, home size, debt portfolio, etc. include Dunsky andFollain (1997, 2000), Green and Vandell (1999), Anderson et al (2007), Poterba andSinai (2008, 2011), Hanson (2012), Hilber and Turner (2014), Hanson and Martin (2014) and Albouy and Hanson (2014), among others.…”

Section: Related Literaturementioning

confidence: 99%

The Impact of the Tax Cuts and Jobs Act on Local Home Values

Martin¹

2018

SSRN Journal

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This paper simulates changes to neighborhood home prices resulting from reforms to tax preferences in the recently passed Tax Cuts and Jobs Act (TCJA). The simulation uses federal tax data summarized at a fi ne geography to impute homeowner rents at the zip code level across six income classes. Employing a user cost framework, I model rents as a function of prices under the old tax law and under the TCJA. While the average price impact of the TCJA is found to be-5.7 percent, local effects range from 0 to-23 percent across zip codes. Variation across income class is also large. Simulations by income class suggest that the most severe declines in price occur for upper middle-income households ($100,000-$200,000). The paper also simulates partial versions of the TCJA that omit different features of the law that affect housing preference. I fi nd that the higher standard deductions in the new law are the largest driver of price declines.

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Regime switches and permanent changes in impacts of housing risk factors on MSA‐level housing returns

Huang

2019

Int. J Fin Econ

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This study assesses impacts of housing risk factors on metropolitan housing excess returns in the augmented housing pricing model. Credit and liquidity factors represent demand and supply sides, respectively, of housing markets. All metropolitan statistical areas have significant regime switches, and booms and busts are turbulent and influenced by the two factors. The explanatory powers of the liquidity factor shrivel for the boom‐bust and regime‐switching volatility specifications, and excess housing returns are less sensitive to nationwide housing dynamics after 2008. This study lends support to time‐varying exposures of housing excess returns to risk factors in terms of temporary switches and permanent changes.

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Metropolitan area home prices and the mortgage interest deduction: Estimates and simulations from policy change

Cited by 21 publications

References 19 publications

Housing and the Tax System: How Large Are the Distortions in the Euro Area?^*

Housing and the Tax System: How Large Are the Distortions in the Euro Area?^*

The Impact of the Tax Cuts and Jobs Act on Local Home Values

Regime switches and permanent changes in impacts of housing risk factors on MSA‐level housing returns

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Metropolitan area home prices and the mortgage interest deduction: Estimates and simulations from policy change

Cited by 21 publications

References 19 publications

Housing and the Tax System: How Large Are the Distortions in the Euro Area?*

Housing and the Tax System: How Large Are the Distortions in the Euro Area?*

The Impact of the Tax Cuts and Jobs Act on Local Home Values

Regime switches and permanent changes in impacts of housing risk factors on MSA‐level housing returns

Contact Info

Product

Resources

About

Housing and the Tax System: How Large Are the Distortions in the Euro Area?^*

Housing and the Tax System: How Large Are the Distortions in the Euro Area?^*