Limiting the Mortgage Interest Deduction by Size of Home: Effects on the User Cost and Price of Housing Across Metropolitan Areas

Authors

Andrew Hanson, Marquette UniversityFollow

Document Type

Article

Language

eng

Format of Original

20 p.

Publication Date

2014

Publisher

American Real Estate Society

Source Publication

Journal of Housing Research

Source ISSN

1052-7001

Abstract

In this paper, I examine the user cost and home price implications of limiting the federal mortgage interest deduction (MID) based on the square footage of a home. I extend the standard user cost model to include a square footage-based cap on the tax-favored status of mortgage interest. I compare two policy alternatives: one that limits the marginal deduction based on home size, and another that removes the deduction on the home based on home size. There is substantial variation across metropolitan areas in both the number of homes exposed to each type of cap, the user cost increase, and the resulting expected price declines.

Comments

Published version. Journal of Housing Research, Vol. 23, No. 1 (2014): 1-20. Publisher Link. © 2014 American Real Estate Society. Used with permission.

Recommended Citation

Hanson, Andrew, "Limiting the Mortgage Interest Deduction by Size of Home: Effects on the User Cost and Price of Housing Across Metropolitan Areas" (2014). Economics Faculty Research and Publications. 445.
https://epublications.marquette.edu/econ_fac/445