A case for ending home ownership subsidies

July 9, 2011

Today Saturday, I have found a cool comment on a blog. I decided to copy and paste it.

Anon says:

Look, this is really simple:

Jack and Jill both work at MicroCon, they each make 100K/year. They live in the same neighborhood, drive on the same roads, use the same police/fire services, visit the same national parks. Many of these things are funded by their tax dollars, they utilize them to the same degree.

Jack rents an apartment next door to Jill’s condo.

Every year Jill pays substantially less taxes than Jack, claiming her mortgage interest deduction. We (the democratically elected government) decided to subsidize Jill’s home purchase because we believe home ownership makes a more stable society.

Jill has more money in her pocket than Jack, purely because of a gov’t decision based on social considerations. Every year Jack and Jill can argue to their representatives that the base tax rate is too high, or too low, and that will never change the fact that Jill pays less. Jack might as well have handed the extra money he pays straight to Jill, there is no difference. The inequality between Jack and Jill’s tax bill is a govt social program.

This comes from comment #97 from an article called: –Half of US social program recipients believe they “have not used a government social program”– By the way an amazing, but not surprising article.

Coming back to Anon’scomment, I would also add that besides the widespread believe that home ownership is good per se, (something that also happens outside the US, even though for example in the case of Denmark with strict policies on renting, rental housing usually is in better conditions than owned places [sic]) probably a main driver of this policy is the powerful banking sector. It is great for banks to have people get mortgages so they can work for them (in the case of my native Spain for the rest of their lives).

This intrusion of the banking sector, has deteriorated the possibilities of people of moving to find better places, in particular now with so many places under water (American expression that means your house now cost less than what you paid for). This is something that economic geographers like Richard Florida have been warning for years.

It also clogs innovation, because getting stocked to a house, people tend to prefer a STABLE job in an STABLE company. That is, no one will open his/her mouth to risk things being unSTABLE. In the case of the US this even gets worse, because people are afraid to loose their healthcare insurance (that’s another topic).

Having said that I have to admit I may have a bias. In the last decade we have lived in Spain, Bolivia, USA (Dallas, Atlanta, Berkeley), and Denmark, and always rent places. Of course, I would not been able to move so much if I would have ever tried to own a place (like many of my friends with similar incomes).

Soon we will have our second child, and I don’t think we’re going to own any time soon. Why so many American and European people have to be punished by our governments (in favor of the richer) for not choosing to own?

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3 Responses to “A case for ending home ownership subsidies”

  1. Jason Says:

    Agreed that housing should not be gov’t subsidized (although it is). Also agree healthcare shouldn’t be tied to employment. Even though we don’t see eye to eye on how it should be done, removing the ties to employment does make sense.

  2. carlos9900 Says:

    Jason, by far the top contributor to this blog. It is not unusual that Jason disagrees with me, so I’m glad to hear that he still doesn’t like subsidies for houses. I remember he believed in that when he was renting, but now that he’s paying a mortgage I though maybe he would have changed his position :)

  3. davide Says:

    Although I own an apartment, I agree with you.
    On top of what you say, my feeling is that interest rates deduction are regressive, since people with higher income can afford to loan more than people wit lower income.
    Furthermore, it gives incentives to buy a house, but gives a disincentive to pay for it – I know many friends who would buy stocks or funds rather than paying down their mortgage loan, they claim it makes more sense financially.


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