What can be done to kick-start the housing industry, and also make housing more affordable for the poor and middle class buyers? A new book by economists Ed Glaeser and Joseph Gyourko takes on these questions and more. Here’s a blurb from the American Enterprise Institute which commissioned the book:
Even after the burst of the housing bubble, homes remain unaffordable for the poor and the middle class in many parts of the country. In a new NRI-commissioned book, Rethinking Federal Housing Policy: How to Make Housing Plentiful and Affordable (AEI Press, December 2008), Edward L. Glaeser and Joseph Gyourko examine why. They show that local building restrictions are the cause of much of the continued high cost of housing.
Glaeser and Gyourko argue that reform of the home mortgage interest deduction would provide incentives to local governments to reduce these barriers, allowing the market to provide more housing and reducing costs. Additionally, they believe that federal subsidies for the production of low-income housing should be eliminated and the funds reallocated to increase the scope of federal housing voucher programs, which allow poor households to relocate to areas of greater economic promise.
Here’s a link for the PDF of the entire book.
May 5th, 2009 at 10:49 am
What would happen if you made rent (partially) tax deductible and took away the mortgage tax deduction?
May 6th, 2009 at 7:50 am
Wendy,
as someone who used to rent to people, I can tell you what would happen: neighborhoods would go downhill. Renters do not take care of the places they rent, trashing them pretty thoroughly as they have no vested stake.
I am in favor of eliminating the mortgage deduction, as I believe it would go a long way in keeping people from buying homes they can’t really afford. But then again, I’m against all deductions and taxing of incomes; we should move to a simpler sales tax (like the FairTax) and be done with it.
May 7th, 2009 at 11:04 pm
I agree with the tendency of renters not to contribute to community. But maybe there is another solution; some renters do contribute to community and look after properties. Maybe there is a non tax solution.
May 10th, 2009 at 11:58 pm
(Link to pdf above does not work. http://www.aei.org/book/971 will take you to link.)
Having only read the synopsis, I’m not really following some of the logic. E.g., that mortgage interest deduction inflates prices: I don’t think most (at least) first-time home buyers really carry the calculation out that far and (until the recent past) the amount you could afford was based on your income and down payment. I also wonder if this study is applicable to current conditions.
Re: rent deduction, do you also give owners any kind of deduction?
And there was a time when renting was the norm, and renters took care of and actually invested in their properties (i.e., painting and such) and communities. Seems there are many more societal factors here. Tho maybe started by housing policies, it will take a long time to change back.