Government intervention in the housing market: Who wins, who loses?

Abstract

We study the effects of government intervention in the housing market on prices, quantities and welfare in a general equilibrium model with heterogeneous agents. We consider (i) the tax-deductibility of mortgage interest payments, and (ii) the exclusion of owner-occupied rents from taxation. We go beyond the existing literature and study both steady state effects as well as effects along the transition between steady states. When comparing stationary equilibria, we find that reducing asymmetries in the treatment of owner-occupied and rental housing in the tax code leads to welfare gains for all agents, as does the elimination of the mortgage interest deductibility. However, during the transition to the new steady-states, the welfare impacts are more varied. All agents benefit from the removal of the deduction of mortgage interest rates, due to general-equilibrium effects on prices and an increase in lump-sum transfers through higher government revenues. However, the introduction of taxes on imputed rents leads to significant welfare losses for all households that consume owner-occupied housing. This highlights the importance of focusing on the transition period for policy analysis.

Distributional Implications of Government Guarantees in Mortgage Markets

“…5 Several papers in this area, such as Chambers, Garriga, and Schlagenhauf (2009);Floetotto, Kirker, and Stroebel (2016); Gervais (2002);Jeske, Krueger, and Mitman (2013); or Sommer and Sullivan (2015) analyze distributional effects of housing policies. This paper contributes to this literature in many aspects.…”

Midiendo el Costo de la Política de Vivienda en EUA

“…Para un nivel de deuda otorgado, las hipotecas de un período son más baratas que las LFRM, porque los cambios en la probabilidad de impago y el costo de nanciamiento de las instituciones nancieras se re ejan completamente en la tasa de interés a la que se transere la deuda hipotecaria. 10 Además, los contratos de un período proporcionan un incentivo para reducir la probabilidad de impago. 11 Por su parte, las LFRM ofrecen un seguro contra choques negativos que aumentan las tasas de interés, ya que únicamente la deuda adicional se carga con una tasa de interés alta.…”

“…En otras palabras, se encuentra disponible un lista completa de combinaciones de tasa de interés / monto del préstamo / tamaño de la garantía 9. Por lo tanto, este documento se abstrae del uso de vencimientos para cobertura 10. En el caso de las ARM como las de los EE.…”

Mortgage Finance Market and Housing Affordability in Urban Areas in Rwanda: A Case of Kigali City

“…Rapid urbanization has made housing one of the basic necessities of man in modern societies. At the same time, the housing market contributes significantly to national economic development through its forward and backwards linkages with other sectors of the economy (Bramley & Watkins, 2016;Floetotto, Kirker & Stroebel, 2016). Despite this, access to decent and affordable housing remains one of the greatest challenges in Sub-Saharan African region due to a plethora of demand and supply constraints exacerbated by its exponential population growth and low income levels (Center for Affordable Finance in Africa, 2010).…”