And then they came for your home mortage tax deduction…

home_taxesFrom Georgia State University  and the department of “let’s just all live in uniform state sponsored mud huts“, comes this latest inanity, blaming carbon emissions on your ability to get a tax deduction for the American Dream of owning your own home. I wonder what sort of home Kyle Mangum lives in?

US housing policies increase carbon output, Georgia State University research finds

Land use policies and preferential tax treatment for housing – in the form of federal income tax deductions for mortgage interest and property taxes – have increased carbon emissions in the United States by about 2.7 percent, almost 6 percent annually in new home construction, according to a new Georgia State University study.

Economist Kyle Mangum, an assistant professor in the Andrew Young School of Policy Studies, measures the effect of various housing policies on energy use and carbon output in “The Global Effects of Housing Policy,” which he recently presented at the IEB III Workshop on Urban Economics in Barcelona.

Mangum’s empirical study uses data on local construction activity, housing consumption and density, labor and materials cost, and local populations and incomes for the nation’s 50 largest metro areas, ranking them by annual carbon output per person.

Policies that affect the amount of housing consumed per capita and housing density are the two major drivers of carbon savings, he finds.

“Larger homes consume more energy,” Mangum said. “Lower density home sites increase gasoline use. Also, many ‘easy-building’ Sun Belt regions that have attracted more new home building are higher energy-use locations.”

His research suggests removing federal tax subsidies for housing and updating land use regulations to encourage higher density in higher energy-use locations would lower the country’s overall energy use, reducing its carbon emissions.

“I find that the federal tax treatment of housing has added a nontrivial amount of carbon output by increasing housing consumption,” he said. “Also, imposing stricter land use regulations in high carbon output cities would decrease the nation’s overall amount of carbon output by approximately 2.2 percent – about 4.5 percent in new construction – primarily by decreasing the amount of house used per person and then by encouraging movement to more efficient low-carbon cities.”

###

Mangum also finds:

High carbon cities contribute about twice as much per person as the low carbon cities;

Many quickly growing cities are above the national average in energy consumption;

Cities with more housing area per person use more electricity per person.

Download a copy of Mangum’s working paper at http://www.ieb.ub.edu/files/PapersWSUE2014/Mangum.pdf.

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122 thoughts on “And then they came for your home mortage tax deduction…

  1. They continue to worry about “carbon”, when isn’t it “carbon di-oxide” they wish to worry about?

    • I’ve begun to think this isn’t an error, but shorthand for carbon-based life forms, especially humans, and, perhaps coincidentally, carbon-based (lumber) housing.

      My specialty is construction. Our industry is the definition of energy-intensive. We build infrastructure that can last a century, as most homes do. So, if one seeks to assess our carbon-consumption, the assessment must be made over time span consistent with the life-cycle cost of infrastructure – between one century and one millenium. A useful assessment would be the life-cycle of the city of Detroit, which includes a de-population and reduced density phase and spans a couple centuries. Such assessments must account for the availability of rail transport, which is what permits low-energy commuting over large distances and large time frames, and bedroom-community social and commercial concentrations. These assessments require such a multi-disciplinary approach (energy calculations, economics, and history) that it’s impossible to believe the research reported has sufficient rigor without first assessing the qualifications of the researchers. The first clue that’s something’s amiss is that the study discusses “cities” not a “city,” or even a small selection.

      Can thus guy estimate the energy cost of producing clinker for grinding into cement? What about the difference in efficiency between a modern steel construction smelter and the old rolled beams running out of Bethlehem Steel? (Modern construction steel is almost completely recycled.) Does he know the materials cost or shipping cost for wood I-joists (made from crop-grown timber)? What about the shipping distances for typical ready-mix hauls (usually locally operated and owned)? And I’ve not even touched the materials outside my specialty – structural engineering. Imagine all the costs associated with insulation, roofing, wiring, HVAC systems, gypsum sheathing inside the house, and furniture and fixtures. Just: wow.

      Nope, he’s studied the problem based on ANNUAL “carbon,” and the home mortgage interest deduction is the problem. Genius!

      Gentlemen, the objection I have to this study is that it suggests further government intervention as a solution. The goal of such publications is to adjust the distribution of winners and losers among various regions and cities, and this adjustment favors established infrastructure contrary to economic drives to abandon the infrastructure for more favorable efficiencies. That, and it’s not merely a rent-seeking proposal, it’s slave-seeking.

  2. Here in the UK we lost our mortgage tax relief years ago. So the proposed policy must work, because Britain has a much smaller carbon footprint than the US, so its all down to our mortgages eh? Here’s me thinking it was due to our relative size, but hey, you live and learn.

  3. So here we have, on the one side, those seeking to decarbonize our energy production, and on the other those who assume there will be no decarbonization. Have these yokels from Ga State
    U travel just a little to the north, into South Carolina, in say, 30 months from now, and they’ll find that increased energy consumption has virtually no effect on carbon emissions, thanks to SC’s mostly nuclear-generated electricity. They also apparently aren’t buying into the notion of
    practical electric cars arriving on the scene anytime in the foreseeable future, which again places them at odds with their fellow Greenies. Sounds to me like their suggestion to cram folks together rests on some pretty shaky assumptions all around.

  4. We all know a couple of high carbon users with too large houses, Al Gore and James Cameron. Hypocrits par excellance.

  5. For centuries the few remaining liberal arts graduate students left after collapse of the higher education bubble of vastly inflated tuition based on government loan sharking will use Internet archives to study human differences, in collaboration with geneticists, as a record of human folly revealed by the perfectly obvious climate deception being taken up as a culture wide cause, and why the temperamentally anti-science instincts of religious parties helped being it down.

  6. If you build a bigger house you probably use more wood and thus more carbon.
    Unless they are talking about CO2, of course …. .

  7. Utter stupidity. Time to throw students out of uni when they graduate and get them into real work.

  8. As written above, no mention of energy efficient building techniques that can quickly render any mention of big houses = “bad” nothing more than “big house” envy. Lower density homes usually have more green space and trees. I would call that a carbon (dioxide) sink! Oh, and even if I live in a big energy efficient house on a large block (which I do), I can choice to take public transportation to work (which I do). So. In your eye! BTW, show me a picture of the mud and bark hut, constructed on a vacant lot that you are living in Mr Mangum. Live by example, not by edict.

  9. I agree completely with the professors arguement and we will start by requiring college professors/lectures to live in dormitories in order to reduce their carbon footprint and promote better contact with students

  10. And a couple other things! No mention or accounting for live style choices. I am fanatical about recycling. On our large lot we have several raised garden beds which we grow what we can. Compost piles in various stages. When required I get my son off is iPad on the weekends and get his hands dirty pulling weeds and cutting the grass with a push, rotary mower. It all goes on the compost piles with any food scraps we have. My son and I do projects together, like build box solar ovens and cook what we grow because we can.

  11. Also, I love your “And Then They Came For…” series, Anthony. Keep it going. Regards,

  12. Hmmm, Wonder if Kyle Einstein will also calculate the number of lives saved, especially children, by lowering of the crime rates? Why does he hate children?

  13. Anybody remember how Al Gore’s utility bill was tracked down? Any hope of finding another?

  14. How about the counter argument that higher density housing, based on statistics, means higher crime rates, higher murder rates, and shorter lifespan.

  15. A better solution would be to live in the temperate environment of the underground. Build large underground cities. We would soon become the Morlocks of an HG Wells fantasy.

    Sometimes what appears to be a good idea at first is just another way of turning us into Morlocks; like living in high density housing.

  16. What is the positive reason why people should recieve a subsidy in the form of lower taxes to buy a house?

  17. Liberals have been trying to get rid of the Home Mortgage deduction for years. This is just another justification for their attempts.

    But an interesting thought occurred. Liberals are of course all for open borders – allowing MORE people in. It is known that the US, without immigration, is on the same level as Europe – in other words, we are not having enough children to sustain our population. So all this new home construction, which causes global warming, is due to immigration, which also is a pet cause of liberals.

    So this quack from GSU is saying the major cause in the US of global warming is the liberals own policies. Kind of poetic justice.

  18. What does who owns the property and pays the mortgage and taxes have to do with how much energy is used? Are they suggesting that renters use less energy than owners? I would take issue with that as it is pretty well understood that those who do not have a financial stake in property tend to do less maintenance which leads to higher costs in time, money and energy in the long run.

  19. “If you build a bigger house you probably use more wood”
    Not always true. Larger homes tend to span longer distances, and make extensive use of engineered wood products. Although 9 & 10 foot ceilings are common for some silly reason.

    “No mention of energy efficient building materials”
    The building code doesn’t push it. Unless you’re building a custom home and spec otherwise, you’ll get code minimums.

  20. Show me how you heat oceans with air then we will talk, until then its a bunch of Chicken Little hand waving. Using the the modest temperature change in the atmosphere to heat oceans is like using a blow dryer to heat an Olympic sized swimming pool.

    Instead of chasing an imaginary problem like climate change lets take on real problems there are plenty.

  21. I wonder what sort of home Kyle Mangum lives in?

    This may be an appropriate question for Al Gore whose hypocrisy is well documented, but not right out of the gate for anyone who proposes a disagreeable idea. It borders on the kind of character assassination the alarmists routinely practice. We’re better than that.

  22. “I wonder what sort of home Kyle Mangum lives in?” A Spokeo search suggests a huge, hypocritical blind spot. But then, those on the philosophical left generally seem untroubled by hypocrisy.

  23. I often ask children, “Should we do everything we can to help the environment.? They universally answer yes.

    Then I explain they would have to move out of their house and plow under Disney World.

    It seems like Mangum has maintained the mentality of an 8-year old.

  24. >> “I wonder what sort of home Kyle Mangum lives in?”

    This is pretty easy information to find these days on the web, so the idle speculation is indeed unwarranted. I agree with the commenter above.. Anthony, you’re better (and normally fairer) than this. I just did the search, and it looks like the assistant professor is not being the hypocrite that many of the CAGW disciples typically are. Extremely modest residence, and looks to be a renter rather than an owner as well.

    REPLY: Well you see I am fairer, I never did the search that you performed nor wrote about it as you have. I only posed the question. It is a valid question to ask if someone is being hypocritical when they dictate how others should live their lives and what privileges they should have – Anthony

  25. So lets keep people out of the “easy building”sun belt regions because that’s where the hypocritical leftist elitists need to live. Everyone else to ghettos the north. You know I agree with this “Study”and the first place we need to densify is Chevy Chase. Let’s cram a nice dense carbon neutral ghetto in that neighborhood.

  26. I find that the federal grant treatment of universities has added a nontrivial amount of carbon output by increasing rhetorical bloviation

  27. Its not the mortgage tax deduction (a red herring) that’s a problem, its the ability to borrow large sums of money today with little or no down payment that obviously increases CO2 emissions. It allows a person to buy something large and expensive today (car, boat, house, airplane, etc) and start emitting CO2 immediately where if they had to save up before purchasing the CO2 emissions would be delayed. Take away the mortgage tax deduction and you can still borrow huge sums of money. The greatest source of CO2 emissions is probably lending practices, after all everything that burns fossil fuels was probably bought with debt, but here’s the problem, our debtocracy (borrow and spend/invest economy) depends on easy lending, and to end that means to collapse the economy. From a CO2 emitting perspective, a save-and-invest economy is 100x better than a borrow-and-spend economy, but from an economic perspective, to shift from our current borrow-and-spend economy to a save-and-invest economy would be shocker … probably total economic collapse. Who gave us our current financial system … the government … who benefits from it the most … the government (a huge borrower) … the financial system/CO2 emitting conflict is one of those things government prefers to not talk about, but if they are serious about it, the financial system must also eventually shift IMO.

  28. 100% Eco Facism with the same scientific level as Eugenics to proof the inferiority of the Jewish Race as an excuse for the Holocaust.

    If you guys don’t throw out hacks soon the slaughterhouses will be opened again.

    Start with Goebbels the Second: http://www.breitbart.com/Big-Peace/2014/06/16/John-Kerry-Protecting-Oceans-from-Climate-Change-a-Vital-Security-Issue

    He is a total nutcase.

    This becomes evidently clear when Goebbels the Second tells us he is looking for cooperation with Iran to encounter ISIS in Iraq.

  29. bobl says:
    June 17, 2014 at 12:20 am
    “Agenda 21 manifest, lets cram humanity into high rise ghettos”

    “Oh, flew in from Miami Beach B.O.A.C.
    Didn’t get to bed last night
    On the way the paper bag was on my knee
    Man I had a dreadful flight
    I’m back in the U.S.S.R.
    You don’t know how lucky you are boy
    Back in the U.S.S.R. (Yeah)”
    The Beatles

  30. So Kyle Magnum discovered that making people poorer causes them to spend less on energy (and everything else). This is an argument for cutting off all funding to state universities to reduce fossil fuel use – people will become more ignorant, poorer, and will automatically use less energy as a result.

  31. If there ever was a reason for businesses to go on strike, this would be a good one. If businesses go on strike, the entire machine stops working. The same machine that is currently being forced to fund Obama’s golf trips while Embassy personnel in Iraq are hunkering down hoping our troops get there in time. Just how much more are we going to have to swallow before this dipwad and his liberal elected and appointed pals are voted out, marched, tarred and feathered, and put on a rail out of Washington? The only way this whole shebang gets turned off is by reasoned majority rule in every branch of government cutting off the teat.

  32. I bet Magnum is eating steak and lobster tonight after creating this publication on behalf of UN Agenda 21 elitists. I don’t entirely disagree with the premise however because I’m not a huge fan of suburban sprawl. I’m an even bigger opponent of current construction of homes that tend to use shoddy methods and are made from young soft pine wood. Moore, OK unfortunately serves as a perfect example of what’s wrong with how homes have been built over the past few decades.

    Earth-sheltered homes should be the norm by now in places they’re practical. Imagine if all the subsidies for renewable energies over the past 10 years would have instead been used for subsidies on advanced home construction. Insurance rates would drop and domestic energy use would decrease (possibly by more than what renewables have added), reducing overall energy cost, and ultimately boosting the economy. Not to mention being in an earth sheltered home during a natural disaster feels just a wee-bit more secure.

  33. What, no mention of the subprime lending that drives vehicle sales? It stopped momentarily after the Great Recession and then continued on its merry way.

  34. Economist Kyle Mangum

    I think Kyle’s problem is that his ancestors put the ‘n’ in their last name in the wrong place. Perhaps he’s the first (perhaps not) of his family to subconsciously realize this mistake. So, perhaps to compensate, he’s advocating that we all live like overcrowded rats in a cage with the resultant violence and mayhem that automatically ensues. (I’m assuming you know about that research, Kyle?) Perhaps inhabiting such a society is a way to truly prove one’s manhood. I can see no other reason for advocating it since, unless one is at the very top tiers of income, overcrowded cities have historically been breeding grounds of potential violent outbreaks, crime, pollution, and oh yes, the occasional epidemic.

    It’s not too late. You can change your last name to Magnum.

  35. I’m a condo dweller. Like the lifestyle. Have a large three bedroom unit, and a very large shared common yard.

    I rather like the idea of a Condo/town. A single building holding four or five thousand people with a small mall built into the ground floor that provides all the basic services. No reason for the units to be little dank holes in the wall, they could be spacious and well lit, maybe looking out over a central atrium like those new Cruise ships.

    All utilities and waste stream centralized. How about an electricity generating trash incinerator working along side a gas-fueled power generator so it has it’s own electric grid.

    Surround it by acres and acres of park-land.

    As long as it was a private development it would likely remain a low crime area. Wouldn’t touch it with a ten foot stick if the Government had anything at all to do with it.

  36. Shhhhhhh, don’t tell them about the 20 million illegals and the structures required to house them.

  37. Mangum directly states as his objective: “decreasing the amount of house used per person.”

    He’s not an economist, he’s an anti-economist, whose object is not to increase human prosperity but to “lower the country’s overall energy use, reducing its carbon emissions.”

    To be exact, NONE of the academic economists EVER do even the most basic due diligence in calculating the external value of CO2. They are supposed to weight the climate outcomes predicted by the IPCC by the probability that the IPCC’s projections are correct, but they all omit that step, simply assuming that the IPCC’s projections are correct. Shameful.

    Analyzed correctly, the external value of CO2 is unambiguously positive:

    http://errortheory.blogspot.com/2008/11/my-comment-on-epas-proposed-rulemaking.html

    Kyle Mangum calling himself an economist is like his sister Crystal Mangum calling herself a victim.

  38. Ga State is also a huge pusher of Equity in education and doing whatever it takes to get graduation rates up for students of color. I listened to the University President spout his social justice views at a program at Emory a few months ago.

    And Atlanta is considered third, after Portland, Oregon and the Twin Cities area in MN in pushing Metropolitanism, as Regional Equity is now called. Targeting the carbon costs of larger houses fits right in with the equity push as well as the Environmental Justice push against Atlanta’s sprawl. EJ also emanates from Atlanta, but it’s headquartered at Clark Atlanta down the road, not GSU.

  39. “Smart Growth” is a Federal program based on “regionalism” which Obama supports and backs because suburban wealth in his mind should be redistributed to the cities. Stanley Kurtz:

    The NGOs and the UN also are involved in the Wilderness Project, which would return all land to wilderness and forbid human presence except in densely packed cities. You can see this agenda embedded in seemingly innocent comments here.

    Examples of land being slowly cordoned off already are the closures of beaches, caves, forests, and other places maintained by parks. The huge public transportation rail projects also are part of the infrastructure for Smart Growth.

  40. This mortgage deduction seems to be an American thing. I would be curious to know how much a person saves in taxes on a $400,000 mortgage. And if you sell your primary residence, do you pay capital gains on the appreciated value or is this tax free?

  41. We should end the home mortgage deduction, but not because of anything to do with carbon or emissions. This deductions distort the market and do little to help the homeowner. The real beneficiaries of the home mortgage deduction are the real estate agents. Your home costs more because of the deduction. This gives agents higher commissions. We should also drop the federal income tax rates as well. Move towards a flat tax, or even a hybrid “graduated flat tax” with low rates and few deductions.

  42. The ability of a young family to purchase a home and sell it years later in order to move to a better home is one of the reasons the US does not have a permanent population which is poor. In other words, the people who lived in poverty 10-15 years ago are not the same people as people who live in poverty today. This attack on the wealth of US citizens, which is largely in the form of home ownership, is a thinly veiled attack on the middle class. This policy would effectively outlaw the middle class, and make social mobility impossible.

    I think this is the end game, and if enough people realize what the goals of the UN and the environmentalists are, then we can begin to respond effectively, in order to preserve land ownership. I am surprised that so few people recognize the blatant, bold push to make land ownership into a class privilege, just as it was in Europe in the dark ages.

  43. According to Stanley Kurtz states will receive more funding for policies which increase population density. That is essentially bribery of the states and has worked once already in nationalizing education. Also, watch for legislation which raises the minimum wage to $15/hour in the cities. I believe this is a method of attracting young people to cities.

  44. Once again the path of the climate alarmists invokes The Law of Diminishing Returns.

  45. People wanting to be people runs counter to the central plan of a population of state serving biological units. They get better at managing that problem every day.

  46. The reason that the housing policies are in place is because it has long been shown that higher levels of home ownership boosts the economy. Are they really prepared to give up that economic boost in the name of questionable science?

  47. IEEE is also promoting so-called Smart Cities, which require in the Institute’s words, “a lot of technology”:

    “Overhauling a city’s infrastructure and services requires a lot of technology: telecommunications, wireless networks, a smart grid, sensors, facial-recognition systems, renewable energy sources, integrated transportation, crowdsourcing, and data aggregation—the list goes on and on. Who better to understand how to put it all together and make it work than members of IEEE?

    “Designing successful and sustainable smart cities requires careful planning of energy, water, transportation, and communications facilities and for the citizens’ public health and safety,” says Gilles Betis, chair of the IEEE Smart Cities Initiative. The initiative is a global, multidisciplinary effort through which IEEE seeks to help municipalities address the huge demands on land, resources, and services associated with population growth.” emphasis added

    http://theinstitute.ieee.org/technology-focus/technology-topic/guadalajara-smart-city-of-the-near-future

  48. Frankly, he is correct. The Administration needs to use Executive Fiat to immediately rescind these subsidies and put a tax on all new home construction.
    /sarc

  49. Steve from Rockwood says:
    June 17, 2014 at 10:00 am
    This mortgage deduction seems to be an American thing. I would be curious to know how much a person saves in taxes on a $400,000 mortgage. And if you sell your primary residence, do you pay capital gains on the appreciated value or is this tax free?

    In the US, the federal deduction is for mortgage interest, not the entire mortgage. In NJ, say, you could easily spend $400,000 on a modest, 3-bedroom 2-bath home. Let’s say you put down 20% or $80,000 so there is a mortgage balance of $320,000. Your monthly payment on a 30-year loan at 5% would be $1,717.83. You first month’s interest is $1,333.33. Your total interest paid for the first year is $15,892. As a deduction, that amount would be worth about $5,000 in tax credit, depending on your marginal tax rate. Not to mention the real estate taxes which are also deductible. For that house in NJ, you might pay anywhere from $7,500 to $12,000 per annum, the deduction of which might be worth $2,500 to $4,000 off your taxes.

    Of course, as time moves on, the interest deduction is of less and less value, due both to the declining absolute value and the time value of money. The beauty of it from the homeowner’s perspective is that (theoretically) due to inflation and the expected progression of wages, the fixed cost of the mortgage takes a smaller and smaller percentage of the takehome pay, making home ownership more affordable as a function of time.

    I do not recall when, but a change in the tax code first allowed for a one-time capital gains free sale, and now I believe that any sale of a primary home is free of federal capital gains.

  50. I don’t care if they do away with the mortgage interest deduction.
    While it’s proper for the government to collect revenue, I don’t think that the tax code should be used for promoting specific economic/human activity. But that’s a separate debate.

    I do though find it ridiculous to use anything based on “carbon” to be the reason to alter the tax code.

  51. Who cares what the stupid reason is? The mortgage interest deduction has got to go. All the deductions need to go. Lower the rates and ditch the deductions, which are merely social engineering.

  52. Alarmists continue to scratch for justification of their control-freak notions.

    People living in mud huts emit much carbon from cooking fires. (Oh, excuse me, at root alarmists want fewer people so maybe there would not be an increase.)

    Probably a hopeless wish that they would put the same creativity and time into pro-human endeavours.

  53. Rujholla said on June 17, 2014 at 10:38 am:

    The reason that the housing policies are in place is because it has long been shown that higher levels of home ownership boosts the economy. Are they really prepared to give up that economic boost in the name of questionable science?

    When haven’t they? Although they will give rosy projections of the jobs created and money “invested” crafting the “better, greener” housing and tout the energy savings as proof their way is best. The people will be happy to be paid for building all the altars of the Green Goddess, then politely ignore the shrieking as it would never be they who are forced to lie down on them.

    Besides, home ownership is an anchor, suitable for a lifetime. There are many economic refugees migrating in search of real work, being forced to accept government aid and housing. Plus the projections are for billions of wandering climate refugees.

    So why would they care if any of us own a home, it’s a detriment. Unless you’re of the elite and political classes, and can afford a home anyplace you’ll likely stay at more than a week in a year.

  54. DJ Hawkins & Steve from Rockwood,

    There is a $250,000 federal credit on net appreciated value if a house is held for 2 years or more. It is $500,000 tax-free for a married couple. A lot of folks have sold, and bought up every couple of years to take advantage of that tax free profit.

    Of course, that requires a steadily rising real estate market.

    • If you “buy up” you do not use the one time exemption ($250/500k). It is only when you cash out or buy down that you have to use it. And it can only be used once. So if you go from a $500k to $400k house this year, you have used your exemption.

  55. ‘Stephen Richards says:
    June 17, 2014 at 1:21 am
    Utter stupidity. Time to throw students out of uni when they graduate and get them into real work.”

    You know, that really would be a sensible thing to do – force graduates to work for a year before they can apply for the opportunity to seek a higher degree, be it a Master’s or Doctorate. That would also require them to, obviously, taste reality again to qualify for the doctoral program. It does seem these people live in a world unlike the one I live in. That just might be enough experience to help them understand the realities of life. It is obvious academia isn’t supplying them with any grounding experiences whatsoever.

  56. This will probably draw lots of negative attention, but I personally view the home mortgage tax deduction as a terrible policy.
    It has been a key part – along with Proposition 13 style property tax limits – in the financialization of the US economy.
    But the good news is: it is highly unlikely that banksters seeking to attack the home mortgage tax dedcution in favor of more subsidies for alternative energy – they’re going up against a much, much bigger gorilla.

  57. As a Canadian I never understood the tax inequity the Home Mortgage tax dodge causes in America?

  58. From dbstealey on June 17, 2014 at 11:25 am:

    Of course, that requires a steadily rising real estate market.

    ABC News keeps telling me about the surging housing market, prices are rising, construction jobs up. I drive down the streets and note how many House For Sale signs are up, and still up.

    They point to the big suburb cities near NYC, LA, DC, San Fran and Seattle. An example was a smallish house in New Jersey, went for something like 3/4 of a million. Out the back door, there was a scenic creek flowing right through the property, walk a few flat yards and put your feet in.

    The siding look tired, it’ll need a new roof soon, you can see the wear patterns on both. It’s right next to the road. Anyone foolish enough to build that close to a creek better have good automatic sump pumps and a hefty flood insurance plan. Around here it might go as low as $70 thou if it’s out in the boonies.

  59. Sun Spot said on June 17, 2014 at 11:43 am:

    As a Canadian I never understood the tax inequity the Home Mortgage tax dodge causes in America?

    The Answer Is: Maybe.

  60. more soylent green! says:
    June 17, 2014 at 10:04 am
    “We should end the home mortgage deduction, but not because of anything to do with carbon or emissions. This deductions distort the market and do little to help the homeowner. The real beneficiaries of the home mortgage deduction are the real estate agents. Your home costs more because of the deduction. This gives agents higher commissions. ”

    That is sooooooooooooooooo wrong. Please explain how taking a tax deduction on the interest you pay on your mortgage drives up the cost of the home?

    As clearly explained by D.J. Hawkins (June 17, 2014 at 10:53 am), a home owner gets to deduct the interest paid during the year on a home mortgage but you must itemize your deductions in order to use it. When your standard deduction is higher than all your itemized deductions you cannot use the mortgage interest deduction.

    Keep in mind this is a tax deduction not a tax credit. Example: if you make $60,000 per year and you paid $12,000 in interest on your mortgage and are able to use the deduction, your adjusted taxable income becomes $48,000.

  61. “Tax dodge”? Have a look around in Europe, where countries like Italy and Spain have created enormous national debt, and then gone after the citizens for “tax evasion.” Our current tax laws are so complex that any one can make a mistake. Current IRS abuses and unnavigable regulations are an excellent argument for instituting a flat tax.

    Besides, I object to the use of the term “subsidy” for taxes not collected, when so many federal subsidies involve actual transfer of funds to a person or enterprise. Real subsidized housing is a system which uses funds from the government to pay the rent either fully or partially for public housing. Subsidized food purchases are also expanding in the form of food cards which allow people to buy food at the store with money from the federal and state governments, a program expanded greatly in the last Farm Bill. The use of these cards is up to 1 in 5 homes. That is subsidized housing and food, not home owners who are also paying property taxes for local infrastructure, etc.

  62. dbstealey says:
    June 17, 2014 at 11:25 am
    “There is a $250,000 federal credit on net appreciated value if a house is held for 2 years or more. It is $500,000 tax-free for a married couple. A lot of folks have sold, and bought up every couple of years to take advantage of that tax free profit.”

    Let’ s be clear that you are talking abut capital gains tax, not income tax. And it must be your primary residence.

  63. Wow, lots of good comments. I especially like tteclod’s (June 17 @ 4:28am). Many potential problems with this kind of policy driver; I can only imagine Paul Erlich salivating over the following possibilities:
    * mandates on where you may live and work, and thus income potential, and
    * how many children may be in a family in “higher energy use” areas.

    It would be interesting to see Mangum’s idea of a practical solution to the aging of homeowner families over time. My wife and I have lived in two homes in our 26 years of marriage, in two different metropolitan areas. Soon our home that we have lived in for about 20 years will no longer host a full-time family of four. Should we move? Where?

    As well, I have to wonder what solutions he might proffer for older homes of larger size in older communities: would families with less than two persons per bedroom be forced to subdivide or open their doors to outsiders?

    Also, in the current era, we’ve seen numerous homes in our suburban area tossed back to the bank. During that period of time (up to two years) no one lives there, further depressing the housing density.

    Oh, but there are serious problems with this…

  64. @D.J. Hawkins and dbstealy. Thanks for the info. Looks like the mortgage interest deduction is pretty significant, especially for higher leveraged borrowers AND there is also a capital gains deduction. In Canada there is no capital gains tax on the principle residence and no mortgage interest deduction.

  65. Tom in Florida says:
    June 17, 2014 at 12:33 pm
    more soylent green! says:
    June 17, 2014 at 10:04 am
    “We should end the home mortgage deduction, but not because of anything to do with carbon or emissions. This deductions distort the market and do little to help the homeowner. The real beneficiaries of the home mortgage deduction are the real estate agents. Your home costs more because of the deduction. This gives agents higher commissions. ”

    That is sooooooooooooooooo wrong. Please explain how taking a tax deduction on the interest you pay on your mortgage drives up the cost of the home?

    As clearly explained by D.J. Hawkins (June 17, 2014 at 10:53 am), a home owner gets to deduct the interest paid during the year on a home mortgage but you must itemize your deductions in order to use it. When your standard deduction is higher than all your itemized deductions you cannot use the mortgage interest deduction.

    Keep in mind this is a tax deduction not a tax credit. Example: if you make $60,000 per year and you paid $12,000 in interest on your mortgage and are able to use the deduction, your adjusted taxable income becomes $48,000.

    The purchase price is higher because of the deduction. You pay more up-front. When you subsidize something, the prices goes up. See Economics in One Lesson.

    “The findings offer two important lessons for the tax expenditure debate. First, although completely eliminating the tax preferences for owner-occupied housing would reduce home prices substantially, curbing those preferences probably would not. Second, reform that limits deductions for mortgage interest while subsidizing the cost of housing transactions could actually raise home prices. – See more at: http://taxvox.taxpolicycenter.org/2013/06/05/what-changes-in-the-mortgage-deduction-would-mean-for-home-prices/#sthash.pWZNjJGh.dpuf

  66. kadaka says:

    They point to the big suburb cities near NYC, LA, DC, San Fran and Seattle.

    Those areas get in the news. But that is right, most of the country misses out on fast appreciation. And there are reasons for high prices in certain areas:

    San Francisco is only 7×7 miles, and completely built up. So there is very limited supply, and strong demand. Silicon Valley [south of SF] is mostly in a valley that is likewise built up. Both areas have lots of high paying jobs, and thousands of internet and startup millionaires. There are more every year.

    When Facebook went public it created around a thousand millionaires, and probably every one of them went out and bought an expensive house. Zuckerberg bought his entire street out, for privacy — in Palo Alto, a very rich city where every house Zuckerburg bought was worth well over $1 million. Those areas listed all have very strong upward pressure on houses.

    So long as the Fed keeps interest rates artificially low, I expect housing to do well. But if rates go just from 4% to 6%, it will knock lots of buyers out of the market. Prices will drop in many areas. But don’t expect that to happen soon. The Fed is still printing tens of billions of dollars a month. The only reason that doesn’t trigger inflation is because mosty countries are doing even worse than the U.S. That’s why their better off citizens are buying in America — another source of demand.

    Even at 6%, interest rates would still be historically very low. I was a real estate broker for many years, and I remember FHA interest rates at 17 ½%, and VA at 18 ½%. As rates dropped over the years all of the benefit accrued to the property owners, and none to the renters. It will be interesting to watch what happens if and when that cycle reverses.

    • @dbStealey

      Even at 6%, interest rates would be historically very low. I was a real estate broker for many years, and I remember FHA interest rates at 17 ½%, and VA at 18 ½%

      Late 70s, early 80s. I remember them as well (family has always been in real estate). And yes, 6% is pretty good. Of course the sub 3% that has been in effect for years now is even better for the homeowner. I got a 5 year ARM back in 2003. So when it started adjusting, it started adjusting DOWN. I am at the point where I can pay it off at any time, but since I am paying about 2.5%, I figure to ride it until the rates start to increase or I pay it all off (about 8 years).

  67. @Tom in Florida says:

    It’s even worse than we thought! This posting estimates the mortgage deduction raises the price of a home by not 5 per cent, not 10 per cent but 16 per cent! Yep, it costs 16% more to buy a home if this source is correct.

    The problem with eliminating this deduction is there are vested interests in keeping it, especially those of us who recently purchased a home!

  68. Sun Spot says:
    June 17, 2014 at 11:43 am
    As a Canadian I never understood the tax inequity the Home Mortgage tax dodge causes in America?

    Is that a question or a statement?

    In America, most people don’t think about things. They don’t think that the mortgage interest rate deduction goes to many people who could easily afford to purchase a home without the deduction. They don’t think about how silly it is to spend $1 in order to save 20 or 30 cents (whatever the tax rate may be). Some people do think it’s unfair that only home owners get that deduction, so they do things like force banks to loan money to people who can’t pay it back.

  69. I wonder it it isnt more obvious to more people the embedded agenda. For instance, lets say the real goal is simply solving the “problem”. A suburbane or rural home could if you want can use various means to passively heat and or keep itself cool. In many areas the water a family needs might be enough simply from roof collection with a grey water system that lowers water usage for garden and or landscaping. If in this scenario we have electric vehicles from clean sources the suburban or rural person could have a very low impact lifestyle, if the same person happened to grow their own food, which they actually have space to choose to do.

    So as I see it, if the real goal was simply solving an issue rather then forcing an agenda, the suggestion might have been more like get rid of this tax deduction, then use this money to give tax reduction to those people who build or retrofit homes to take care of various needs with less inputs or what have you. This would get us to the goal much faster if the goal was actually making society have less of a impact, rather then forcing us into cities which appears to be the drive.

  70. “Larger homes consume more energy,” Mangum said. “Lower density home sites increase gasoline use.”

    Stunning. Who would have thought it!

    Where would we be without “experts”?

  71. To be clearer, you can if you desire meet a families needs with much less of an impact if you have a bit of space and a single family home. Im not sure how you can do that in densely packed cities. If we are going to get all nazi, atleast have a shred of sanity and offer options. Especially when some options are far superior if the real goal is a low impact society.

  72. more soylent green! says:
    June 17, 2014 at 3:33 pm
    “It’s even worse than we thought! This posting estimates the mortgage deduction raises the price of a home by not 5 per cent, not 10 per cent but 16 per cent! Yep, it costs 16% more to buy a home if this source is correct.”

    Again, how does it do that in the real world? The posting is not real world.
    Real Estate 101: buyers set the market price on housing! Sellers can only ask a price. It is simply supply and demand. Real estate is true free market at work. You build or buy a house at a cost, you sell it at a price that produces a profit or loss depending on current market conditions. . The net proceeds from the sale of the home are paid to the seller without regard to how the buyer pays for it. While a cash deal may entice the seller to take less money, it is because cash deals are much easier to close and that has a certain value to a seller. It has nothing to do with mortgage interest deductions

  73. more soylent green! says:
    June 17, 2014 at 3:39 pm
    “In America, most people don’t think about things. They don’t think that the mortgage interest rate deduction goes to many people who could easily afford to purchase a home without the deduction. ”

    I see where your misunderstanding is. The basis for determining whether a person can afford a house or not is based on one’s monthly income to expense ratio. It has nothing to do with a person’s annual federal income tax deductions. Banks do not care how much of a tax refund a person gets, that can be manipulated a hundred ways. Banks only want to know (1) is your monthly income sufficient to pay the mortgage and your other monthly obligations and (2) does your credit history show a willingness to pay your bills.
    Now a slick seller may try to use the mortgage interest deduction to rationalize a higher price to a naive buyer but that is a horse of a different color.

  74. honestly, and its somewhat related to this, I would not mind seeing the mortgage deduction scrapped. as long as all other deductions (kids/business losses/damed gambling losses/etc) were also scrapped.
    for everyone.
    no matter what their income is.

  75. Kyle Mangum of Georgia State University has found that “US housing policies increase carbon output…” Hence, tax deductions for home owners are partly responsible for higher carbon dioxide production in this country. This is another example of how the insane belief that carbon dioxide causes global warming is used to tell us how to arrange our private lives. For your information, Mangum, carbon dioxide does not cause of anthropogenic warming or any warming whatsoever. In case you haven’t noticed, there is absolutely no greenhouse warming today and there has been none for the last 17 years while carbon dioxide steadily increases. This greenhouse warming mania started when James Hansen announced in 1988 that he had proved the existence of the greenhouse effect. It turns out he lied about it. He was using a non-greenhouse warming that took place between 1910 and 1940 as part of an alleged hundred year run of greenhouse warming. That was wrong but nobody checked his work and he has been getting away with this for the last 26 years. As to the warming pause, all those big “experts” are looking everywhere for that “lost heat”, even in the ocean bottom. Their greenhouse theory of Arrhenius totally fails to explain it and should be thrown out. Its place is in the dust bin of history. The only theory that correctly explains the pause is the Miskolczi greenhouse theory. It works in the special situation where more than one greenhouse gas is actively absorbing IR, something the Arrhenius theory cannot do. The greenhouse gases in earth atmosphere that must be accounted for are carbon dioxide and water vapor. They form a joint optimum absorption window whose invariant optical thickness is 1.87. If you now add carbon dioxide to the atmosphere it will start to absorb, just as Arrhenius says. But this will increase the optical thickness, and as soon as this happens, water vapor will start to diminish, rain out, and the original optical thickness is restored. As a result, no warming takes place despite an increase of atmospheric carbon dioxide that just took place. This is the situation we have now – warming has ceased in spite of a constantly increasing atmospheric carbon dioxide. This happens to be how the laws of nature control absorption of radiation by the atmosphere. They have always done so and any reports of previous greenhouse warming are nothing more than misidentification of natural warming by eager-beaver “climate” scientists wishing to prove the existence of their magical greenhouse warming.

  76. Skip to the real agenda, there are just too many people who want a mortgage. Mangum Logic: No people, no houses, no mortgage, no deduction, no carbon. Mr. Mangum may believe the ideal population of earth is 500 million……………………………………

  77. I like my carbon in tetrahedral crystlline form. Usually people living in big mansions can afford lots of this.

  78. Tom in Florida says:
    June 17, 2014 at 5:58 pm
    more soylent green! says:
    June 17, 2014 at 3:39 pm
    “In America, most people don’t think about things. They don’t think that the mortgage interest rate deduction goes to many people who could easily afford to purchase a home without the deduction. ”

    I see where your misunderstanding is. The basis for determining whether a person can afford a house or not is based on one’s monthly income to expense ratio. It has nothing to do with a person’s annual federal income tax deductions. Banks do not care how much of a tax refund a person gets, that can be manipulated a hundred ways. Banks only want to know (1) is your monthly income sufficient to pay the mortgage and your other monthly obligations and (2) does your credit history show a willingness to pay your bills.
    Now a slick seller may try to use the mortgage interest deduction to rationalize a higher price to a naive buyer but that is a horse of a different color.

    Tom, no misunderstanding here. You don’t even seem to be talking about the same thing. I never mentioned affordability. I mentioned how the tax deduction raises the cost of housing (again, see Economics in One Lesson if you’re curious about how supply, demand and prices are affected by subsidies and other incentives (for what is a mortgage tax deduction if not an incentive?). I concede I make a quick argument, rather than a detailed one.

    It’s basic economics. The incentives affect the supply and the demand. The deduction makes home ownership more desirable, increasing the demand. The home mortgage tax deduction, distorts the market.

    Perhaps it’s the clumsy way I stated people who receive the deduction — sold as making home ownership more “affordable” — could afford to purchase a home without the deduction. As you noted, this has nothing to do with qualifying for a mortgage and you missed the point entirely. If you follow this site, you know that subsidies for green cars go to the well-to-do, that those incentives, deductions and credits are really just hidden payments to the car manufacturers, not to the purchaser. To be clear, only the better-off can use these deductions as they must be able to make the purchase in the first place. Because of our graduated income tax system, families with lower incomes get proportionally less of a deduction than somebody in a higher tax bracket.

    The lowest federal tax bracket is 10%, the highest is 39.6%. A middle-class family is likely to be in the 15% bracket. Do the math from there.

    Economics in One Lesson is available as a free PDF ebook: https://mises.org/books/economics_in_one_lesson_hazlitt.pdf

    • @more soylent green – I disagree. The deduction does not distort the market, the income tax code as written distorts the market. Initially the standard deduction was to cut out all income necessary for the individual and/or family to live on during the year. When it stopped being that, it distorted the market. The deduction merely is trying to bring the market back from distortion.

  79. I’m all for getting rid of the interest deduction. There’s no reason for us to be subsidizing banks.

  80. The distortions created by a debt financed economy are real. Are our priorities driven by priorities of the bankers? Who would waste their life’s energy buying a house 3 times the size needed if the bankers weren’t there with the easy financing. The same applies to vehicles. A huge part of the economy is gluttonous waste. Is this really what we should be doing with the planet’s limited resources? Carbon doesn’t matter till there isn’t enough carbon to burn.

  81. more soylent green! says: June 18, 2014 at 8:43 am
    “It’s basic economics. The incentives affect the supply and the demand. The deduction makes home ownership more desirable, increasing the demand. The home mortgage tax deduction, distorts the market. ”

    Not so. The home mortgage interest deduction may appear to have a very tiny effect in a few specific cases but it’s influence on the housing market is completely swamped by many other factors. So in no way does it “distort” the market. Perhaps therein is my objection to your original statement. (Think of how they present CO2 as the driver of warming and how we object to that).

  82. Pamela Gray:
    The only way this whole shebang gets turned off is by reasoned majority rule in every branch of government cutting off the teat.

    IOW, it will never happen.

  83. Bruce Cobb says:
    June 18, 2014 at 12:08 pm
    “There many good, sound, logical reasons for eliminating the home mortgage deduction, possibly replacing it with a credit instead. Reducing “carbon” just doesn’t happen to be one of them.
    http://www.cbpp.org/cms/?fa=view&id=3948
    ——————————————————————————————————————–
    First off, everyone needs to correctly refer to it as a mortgage interest deduction not a mortgage deduction. Otherwise those that are not familiar with it may mistakenly assume that the entire mortgage gets to be claimed as deduction.

    Thanks for the link. It seems that most of the objections to the home mortgage interest deduction are directed at how it is administered and how the tax code handles it. I would agree that the original idea has sound merits but as usual the government over complicates things and screws it up. Any of the proposed remedies look like they still do the same thing.

  84. Tom in Florida says:
    June 18, 2014 at 12:40 pm
    more soylent green! says: June 18, 2014 at 8:43 am
    “It’s basic economics. The incentives affect the supply and the demand. The deduction makes home ownership more desirable, increasing the demand. The home mortgage tax deduction, distorts the market. ”

    Not so. The home mortgage interest deduction may appear to have a very tiny effect in a few specific cases but it’s influence on the housing market is completely swamped by many other factors. So in no way does it “distort” the market. Perhaps therein is my objection to your original statement. (Think of how they present CO2 as the driver of warming and how we object to that).

    And you reached this conclusion that the mortgage interest deduction has a “very tiny effect in a few specific cases” how? You keep saying things without attribution. I gave an example that indicated a 16% increase in the purchase price. Please explain how the basis for your claims.

  85. more soylent green! says:
    June 18, 2014 at 2:36 pm
    “And you reached this conclusion that the mortgage interest deduction has a “very tiny effect in a few specific cases” how? You keep saying things without attribution. I gave an example that indicated a 16% increase in the purchase price. Please explain how the basis for your claims.”
    ————————————————————————————————————————–
    I do not recall any example where you showed that unless you are referring to this:
    (more soylent green! says:June 17, 2014 at 3:33 pm)
    “It’s even worse than we thought! This posting estimates the mortgage deduction raises the price of a home by not 5 per cent, not 10 per cent but 16 per cent! Yep, it costs 16% more to buy a home if this source is correct.”

    Quoting the post is not an example by you. I base my claims on real world experience as a Realtor. I know why homes are priced the way they are, it was my business to know. Never once did the mortgage interest deduction come into play when figuring out a comparable selling price. This deduction was used as a selling point by lenders to put a positive spin on how much interest they were charging. Since the mortgage interest deduction has NOTHING to do with monthly cash flow, which is the basis for qualifying for a home loan, it does not effect the selling price. A seller can ask any price he wants but if there are no buyers at that price, it is over priced. If a home sells immediately it was probably under priced, but that may be OK with the seller depending on circumstances. And that point, the circumstances and motivation of the seller has far more influence on the asking price than anything else. You must understand that real estate is local in nature, which means that very local conditions influence the market very much. Investor participation in the local market is another influence on local prices. So is location. I am sure you know the saying, real estate is about 3 things: location, location, location. One of the reasons for the housing market crash was that people were buying off the internet without regard to local conditions around the property. There were too many overpriced sales because of this especially from investors who suddenly found themselves with negative cash flow on their investment. Panic would set in and they would dump these properties on the market in hopes of cutting their losses. Then there were all the news reports about people being underwater on their home loans and more panic was created. This consequent deluge of properties for sale immediately changed what was a seller’s market into a buyer’s market. But it also slowed sales as buyers were now being cautious and waiting in hopes of riding the price down. No where in all of this does the mortgage interest deduction have any effect. But what makes housing prices rise you may ask. Same thing in reverse, motivated buyers in a location with a declining inventory. Under these conditions, fear that prices will continue to rise will motivate a buyer to take action quickly when they find a property they want. Perceiving a value that is greater than the cost is another motivator for buyers. When buyers are motivated prices rise.
    Now I have given you some real life reasons for housing price fluctuations and none of them include the mortgage interest deduction.

  86. Do my home grown tomatoes in my “less dense” living area do anything to offset my outrageous carbon footprint? How about my fruit trees?

  87. catweazle666 says:

    June 17, 2014 at 4:19 pm

    So where do all those “high density” areas put the snow when it falls?

  88. Underground colonies, like ants – that’s the ultimate solution, by Mangum’s logic. It looks like China might already be headed in that direction – with some possible complications ?

  89. Tom in Florida (June 18, 2014 at 5:01 pm) “Now I have given you some real life reasons for housing price fluctuations and none of them include the mortgage interest deduction”

    Of course the mortgage tax deduction doesn’t cause any price fluctuations. That’s because it is a permanent distortion in investment due to preferential federal and state tax treatment. The only way that a mortgage tax deduction makes sense is to tax all homeowners on the free rent they get by owning a home. Currently, homeowners get tax-free imputed rental income while deducting interest and property tax expenses on that income. In all other cases businesses must pay tax on the imputed income before they are allowed to deduct those expenses.

    Perhaps it is good social policy to encourage that extra investment in primary, secondary and even tertiary owner-occupied residences. But even benefitting as a primary owner myself I would rather do away with that and all other investment distortions, thus growing overall productivity.

  90. eric1skeptic says:
    June 19, 2014 at 3:17 am
    “Of course the mortgage tax deduction doesn’t cause any price fluctuations. That’s because it is a permanent distortion in investment due to preferential federal and state tax treatment. The only way that a mortgage tax deduction makes sense is to tax all homeowners on the free rent they get by owning a home.”
    ————————————————————————————————————————
    All home owners do not qualify for the mortgage interest tax deduction.. In the link cited by Bruce Cobb earlier only half of home owners with mortgages are able to use the deduction. Of course that does not include owners who have no mortgage. So a “tax them all” policy is ridiculous.

    And the notion that home owners get “free rent” is simplistic. Local government income is based on property taxes which are assessed usually as a percentage of fair market value. Home owners are much more likely to maintain and improve their property keeping market values higher than non owner properties. Those higher values translate into higher property taxes which benefit the whole community. That is especially true of school taxes. Being an ad valorem tax, school taxes are based on property value not the number of children in school. My school tax makes up over 50% of my ad valorem taxes yet I have no children in school. A renter who has children in school pays no school tax. Now if you want to address energy use, once again home owners lead the way in energy use reduction upgrades, mainly because of the financial benefit of lower bills and increased value. Neither renters nor their landlords have any incentive to improve the energy efficiency of the property being rented.

    I suppose we could go back and forth all day and night on this subject each citing what is good and what isn’t about this policy, it is a complicated subject. But I will disagree that the home mortgage interest tax deduction does anything to distort the housing market because as I said earlier other factors totally swamp that effect.

    What this deduction actually does is reduce the overall cost of a home loan. But that does not mean a person will pay more for a property, it means they can buy a better property. And it is the lender who benefits because the reduced cost does not affect his bottom line. It also allows a mortgage broker to sell a higher rate under the sales pitch that the practical interest rate is lower because of the deduction. And of course, the mortgage broker gets paid a commission on selling the higher rate.

  91. Tom,

    You fail to understand the mortgage interest rate deduction is a fixed distortion to the market. You do make several arguments to distract from the point at hand. There are several benefits and downsides to the mortgage interest tax deduction and whether it’s a net good or bad is largely a matter of opinion, political orientation and self-interest. I cannot find one source anywhere to support your claims that this tax deduction does not distort the market. Quite the contrary, it’s well recognized.

    But I understand your desire to keep your commissions high. You keep repeating the standard rhetoric of the real estate industry.

  92. Tom in Florida (June 19, 2014 at 5:39 am) “And the notion that home owners get “free rent” is simplistic.(1) …. Those higher values translate into higher property taxes which benefit the whole community. (2) …Neither renters nor their landlords have any incentive to improve the energy efficiency of the property being rented. (3)”

    On (1), There is a discrepancy between businesses which deduct expenses from imputed income and homeowners who take deductions against their other income. Your first paragraph about some people not taking the deduction proves the case even more strongly, it is simply a middle class handout. On (2) you ignore the many downsides of overpriced housing. On (3) both landlords and tenants would want to lower their costs.

    You conclude: “What this deduction actually does is reduce the overall cost of a home loan. But that does not mean a person will pay more for a property, it means they can buy a better property. And it is the lender who benefits because the reduced cost does not affect his bottom line. It also allows a mortgage broker to sell a higher rate under the sales pitch that the practical interest rate is lower because of the deduction. And of course, the mortgage broker gets paid a commission on selling the higher rate.”

    That’s all true and all devoid of any benefit to the economy. On the contrary, it misallocates resources. OTOH there are many (e.g Keynesians, although I’m not saying you are one) who believe that politically directed economic activity (versus privately decided economic decisions) can lead to more overall growth. Build a bunch of houses nowhere and then build a bridge going there. The other aspect you may be ignoring is that housing is consumption, not investment.

  93. probono says:
    June 19, 2014 at 12:03 am responding to…

    catweazle666 says:
    June 17, 2014 at 4:19 pm

    So where do all those “high density” areas put the snow when it falls?
    ========================================================
    Good point, but remember the old Soviet saying, “We pretend to work and they pretend to pay us.”
    By then, everyone will be a government employee, so who cares if it snows?

  94. H.R. says:
    June 19, 2014 at 10:15 am repsonding to

    probono says:
    June 19, 2014 at 12:03 am responding to…

    catweazle666 says:
    June 17, 2014 at 4:19 pm

    My point was more that “higher density” areas by definition require a disproportionately higher degree of infrastructure which brings it’s own carbon footprint. I am sure the authors of this study have included that. \

  95. more soylent green! says:
    June 19, 2014 at 6:54 am
    eric1skeptic says:
    June 19, 2014 at 7:22 am
    ———————————————————————————————————————-
    Distortions, overpricing and such are words used in theory and text books. In the real world the only time a real estate market is overpriced is when there is no one willing to buy or rent at those prices. As long as there are buyers and renters willing to pay the price the market is exactly where it should be at that time. As I have said before, buyers set the market. It doesn’t matter what so called experts or economists say, there is no theory that can say what should be, it is what buyers demonstrate it to be by their actions. Again I cannot stress enough how local in nature real estate is. And by local I mean just that, the real estate market within a community can be different by neighborhoods. So making a generalization that the mortgage interest tax deduction distorts the entire market by 16% has no value or real meaning.

    And directly to ” more soylent green!,”
    You have now said twice that real estate agents desire this deduction to keep their commissions high. You also say I am “repeating standard rhetoric of the real estate industry”.. I can only conclude that you have some kind of problem with real estate agents and their commissions. I have encountered many folks like that, some with legitimate complaints about an individual agent, but most just believe it’s all a gravy train for agents who do nothing for the money. My answer to that is 1) if you have a problem don’t use an agent, do the work yourself and 2) it you think it is that easy, get a license and join the party. But beware, you may find the gravy doesn’t taste that good most of the time.

    I have enjoyed the discussion, but it is time to move on. There is a solar thread that interests me much more. But I will check back to see if you have a last word.

  96. probono says:
    June 19, 2014 at 5:42 pm
    responding to…
    H.R. says:
    June 19, 2014 at 10:15 am
    repsonding to…
    probono says:
    June 19, 2014 at 12:03 a
    responding to…
    catweazle666 says:
    June 17, 2014 at 4:19 pm
    =============================================
    Hi, probono.
    Yeah, I got your point and it was a good one.
    Mine was just a little dig at the political aims of those that act in the name of saving the planet. I was just taking advantage of the chance to ‘stand on the shoulders’ of your points.

  97. Tom in Florida says:
    June 19, 2014 at 7:33 pm
    more soylent green! says:
    June 19, 2014 at 6:54 am
    eric1skeptic says:
    June 19, 2014 at 7:22 am
    ———————————————————————————————————————-
    Distortions, overpricing and such are words used in theory and text books. In the real world the only time a real estate market is overpriced is when there is no one willing to buy or rent at those prices. As long as there are buyers and renters willing to pay the price the market is exactly where it should be at that time. As I have said before, buyers set the market. It doesn’t matter what so called experts or economists say, there is no theory that can say what should be, it is what buyers demonstrate it to be by their actions. Again I cannot stress enough how local in nature real estate is. And by local I mean just that, the real estate market within a community can be different by neighborhoods. So making a generalization that the mortgage interest tax deduction distorts the entire market by 16% has no value or real meaning.

    And directly to ” more soylent green!,”
    You have now said twice that real estate agents desire this deduction to keep their commissions high. You also say I am “repeating standard rhetoric of the real estate industry”.. I can only conclude that you have some kind of problem with real estate agents and their commissions. I have encountered many folks like that, some with legitimate complaints about an individual agent, but most just believe it’s all a gravy train for agents who do nothing for the money. My answer to that is 1) if you have a problem don’t use an agent, do the work yourself and 2) it you think it is that easy, get a license and join the party. But beware, you may find the gravy doesn’t taste that good most of the time.

    I have enjoyed the discussion, but it is time to move on. There is a solar thread that interests me much more. But I will check back to see if you have a last word.

    Tom in Florida,

    I apologize for my tone, but my patience was wearing thin. Distortions and incentives affect supply, demand, prices and behavior every day. Largely because our government has it’s hands in everything, I’m hard pressed to think of something not subject to those factors.

    Rent control. Zoning restrictions. Requirements for greenspace. Requirements or restrictions on housing density — without making any judgement on whether these are good or bad, all these distort the local market.

    Federal housing policy that requires lenders to make loans to people not likely to be able to repay the loans distorts the national market, but some areas more than others. Incentives and disincentives in the federal tax code and federal tax regulations encourage and discourage certain behaviors and actions and thus affect supply and demand. I can find dozens of business writers and economists both on the left and the right who agree the federal mortgage interest tax deduction distorts the market, raises home prices, raise loan prices, incentivize people to overbuy, etc., etc. I cannot find any source which says it has no effect because of local factors.

    Yes, all real estate markets are local, but the federal tax policy is not. It’s national. I wouldn’t expect the distortion to be equal in every market, but I don’t believe it to have no effect in most cases, either.

    I’m gave a few links to support my statements and I’m not going to post each and every one I find. You have posted several responses, which while well-written and thoughtful, offered no supporting references.

    The real estate industry fights ending the mortgage tax deduction tooth and nail, a policy I disagree with. And I do benefit from this deduction, btw. I’ve called for elimination of this deduction along with a decrease in overall tax rates. I believe the real estate industry is putting their own interests above the public good in this matter and I stand by my assertion that the primary reason is their own interest in keeping prices, and commissions high.

    My father was once a broker and my mother also an agent. I have bought and sold about 10 homes (including investment properties) and my experience with agents is they are like anybody else in any other field. We recently sold a home and bought a new one. The two agents for these transactions were worth every penny. We were so please with them we bought them gifts and gave them gift cards as thank yous. We had other agents who did nothing but list our properties listed on MLS and hope a buyer’s agent brings in a buyer.

    What I’m asking for are objective sources to back up your contention that the home mortgage deduction has no effect on the purchase price of a home.

    Thank you

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