Are Houses Too Big or In the Wrong Place? Tax Benefits to Housing and Inefficiencies in Location and Consumption

David Albouy, Andrew Hanson

Chapter in NBER book Tax Policy and the Economy, Volume 28 (2014), Jeffrey R. Brown, editor (p. 63 - 96)
Conference held October 3, 2013
Published in October 2014 by University of Chicago Press
© 2014 by the National Bureau of Economic Research
in NBER Book Series Tax Policy and the Economy

Tax benefits to owner-occupied housing provide incentives for housing consumption, offsetting weaker disincentives of the property tax. These benefits also help counter the penalty federal taxes impose on households who work in productive high-wage areas, but reinforce incentives to consume local amenities. We simulate the effects of these benefits in a calibrated model, and determine the consequences of various tax reforms. Reductions in housing tax benefits generally reduce inefficiency in consumption, but increase inefficiency in location decisions, unless they are accompanied by tax-rate reductions. The most efficient policy would eliminate most tax benefits to housing and index taxes to local wage levels.

This chapter is no longer available for free download, since the book has been published. To obtain a copy, you must buy the book.
Order from

You may be able to access the full text of this document via the Document Object Identifier.

This paper was revised on September 26, 2016

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.1086/675588

This chapter first appeared as NBER working paper w19815, Tax Benefits to Housing and Inefficiencies in Location and Consumption, David Albouy, Andrew Hanson
Users who downloaded this chapter also downloaded these:
Brown Introduction to "Tax Policy and the Economy, Volume 28"
Markle and Shackelford The Impact of Headquarter and Subsidiary Locations on Multinationals' Effective Tax Rates
Knittel The Political Economy of Gasoline Taxes: Lessons from the Oil Embargo
Poterba w3963 Taxation and Housing: Old Questions, New Answers
Alstadsæter, Kopczuk, and Telle Are Closely Held Firms Tax Shelters?
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us