The Rise and Fall of Housing’s Favored Investment Status
- Topics:
- Market Studies,
- Strategic Leasing
- Tags:
- Fannie Mae,
- Finance,
- Financial Planning,
- Free Trade,
- Taxes
- Source:
- Fannie Mae
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Overview: "This article surveys and interprets a wide body of literature on the taxation and subsidization of investment in owner-occupied and rental housing, as well as the impact of and rationale for favorable treatment. We find a broad increase in housing’s favored status during the 1970s, a reversal in the 1980s, and a further decline in the 1990s. These shifts have two broad components. First, an endogenous component is caused by variations in the inflation rate. Because housing is the tax-favored asset, the higher are nominal returns, the greater is the tax advantage. Second, the exogenous component is largely reflected in lowering tax rates even below their 1970 levels and the weakening of the mortgage interest deduction in many countries. We attribute this component to the aging of the baby boomers, which first provided a constituency for more generous treatment of owner-occupied housing but now is working in the opposite direction. "
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Format: PDF | Size: 130KB | Date: Jan 2003 | Pages: 19
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