Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/175711 
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper No. 2087
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
This paper presents new evidence on the impact of the preferential treatment of owner-occupied housing in Europe. We find that tax benefits to homeowners reduce the user cost of housing capital by almost 40 percent compared to the efficient level under neutral taxation. On average, the tax subsidy translates into an excess consumption of housing services equivalent to 7.8 percent of the value of owner-occupied housing, or about 30 percent of financial asset holdings in household portfolios. The bulk of the subsidies stems from under-taxation of the return to home equity, while the average contribution of the tax rebate for mortgage interest payments is driven down by relatively low loanto- value ratios in the data. However, at the margin, the tax-induced incentive to use mortgage debt to finance the purchase of the main residence is sizable.
Subjects: 
Taxation
Owner-Occupied Housing
User Cost
JEL: 
H24
H31
D14
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2809-0
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.