What question did this study set out to answer?

To estimate how shifts in expected inflation and federal tax subsidies alter real house prices and the long-run equilibrium size of the housing capital stock.

November 1, 1984The Quarterly Journal of Economics

Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach

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Authors

JPJames M. PoterbaDartmouth College

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Implication

Simulation study reveals inflation increases real housing prices in property markets, suggesting tax subsidies significantly distort capital allocation.

Key Points

To estimate how shifts in expected inflation and federal tax subsidies alter real house prices and the long-run equilibrium size of the housing capital stock.
Developed an asset-market equilibrium framework capturing the interaction between inflation, mortgage interest deductions, and the user cost of housing.
Conducted macroeconomic simulations based on 1970s inflationary trends to quantify price effects and capital stock adjustments.
Accelerating inflation substantially reduced user costs for homeowners, accounting for up to a 30 percent increase in real house prices.
Sustained high inflation rates generated a sizable expansion in the long-run equilibrium stock of owner-occupied housing.

Cite This Study

James M. Poterba (1984) studied this question.

synapsesocial.com/papers/69fff7d62ff633f36577c5d1 https://doi.org/10.2307/1883123

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Implication

Simulation study reveals inflation increases real housing prices in property markets, suggesting tax subsidies significantly distort capital allocation.

Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach

Discussion

Member takes

Implication

Key Points

Cite This Study

Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach

Discussion

Member takes

Implication

Key Points

Cite This Study

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