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A new study by researchers at the Johns Hopkins Carey Business School suggests that changes in U.S. tax policy could make owning a home more achievable for many Americans. By analyzing housing demand and different tax policies using a dynamic lifecycle model, the researchers found that replacing tax deductions for mortgage interest with refundable mortgage interest credit could increase homeownership rates by 5.9%. This change would particularly benefit low- and middle-income households as well as young home buyers.
The study, titled “Tax Preferences and Housing Affordability: Explorations using a Life-Cycle Model,” has been published in the SSRN Electronic Journal.
According to Michael Keane, a professor at the Carey Business School and an expert on lifecycle modeling, understanding the housing market is complex due to its intricate supply and demand dynamics compared to other markets.
Keane explains that while the current mortgage interest deduction does help lower- and middle-income individuals afford homeownership, it also incentivizes wealthier individuals to purchase larger homes. By converting this deduction into a flat 24% credit for all homebuyers regardless of income level, the researchers predict more equitable benefits across different income brackets.
2024-10-31 09:15:02
Original article available at phys.org