Mr. Gross says "Those are big hypothetical costs for taxpayers. But they would still be smaller than the actual benefits taxpayers—or at least the large majority of taxpayers who are homeowners—have already received."

Let's call this what it is: suburban welfare. The government takes from the renters and gives back to the homeowners. Since renters tend to be poorer than homeowners, it's robbing the poor to pay the rich. Since renters tend to be younger than homeowners, it's robbing the young to pay the debts of the old. Since there are more renters in dense urban areas, it's robbing the cities to pay the suburbs.

Suburban welfare.

Just another policy in a long line of government bailouts designed to herd us all into mortgages, marriages, and little boxes made of ticky-tacky. Why do the 'burbanites get to deduct their mortgage interest, but I can't deduct interest on a nice car or an expensive Living Room set? Why do the 'burbanites get a tax-free investment vehicle via their house when I have to pay capital gains on my small caps? Zoning laws? Explicitly in favor of single-family residential. Explicitly designed so that the "evil developers" won't build those nasty apartments that "bring down property values." Heaven forbid.

and the irony is that the tax advantages have built an infrastructure which is going to be obsolete if Peak Oil obtains. The tax loopholes encouraged the housing bubble, and all bubbles inevitably burst. All this was foreseen.

Renters will have to protect themselves by buying gold.

Poor renters are indeed shafted, but poor people don't vote. Homeowners vote.

As a public finance economist, Daniel Gross rates an "F", or at best, a "D". He never asks the question: should the Federal government subsidize home ownership? If the answer is yes, he never explains why this is a good policy. Now let's assume, it is good policy, is lowering the cost by subsidizing the interest rate on home mortgages; i.e., through the roles of Fanne Mae and Freddie Mac and the only non-business interest payments individuals can still deduct from their Federal income tax: the interest on home mortgages.

The policy of subsidizing single family mortgages has had a role in producing urban sprawl and the resulting degradation of the environment through destruction of wetlands, larger homes on larger lots, longer commutes by driver-only vehicles, and other causes.

Perhaps the only real beneficiaries of the subsidization of mortgages are owners of vacant land on the periphery of metropolitan areas, and home builders who earn higher than normal profits by building larger houses with more "bells and whistles."

The tax disadvantage renters are under is apparently not enough. Now we should help ensure easier borrowing terms for future homebuyers? When did affordable mortgages become a right?

what happens if large numbers of distressed (suburban) home owners are evicted when their homes are foreclosed?

might they go looking for apartments? might the increased demand drive up apartment rents?

just asking, you know

BINGO!! Already happening, at least in NY.

Not just foreclosures, but people who might have wanted to buy an apartment aren't, due to either the expectation that prices will decline or the inability to get financing due to increased underwriting standards.

Demand for rental units soars and rents go up. Also don't forget the supply issue: people are less likely to buy investment property when prices are falling, so these properties don't enter the rental pool either. It's inevitable, really; property prices and rents are counter-cyclical.

@ Baltimore Aureole:

No problem, if rents raise developers will build more apartments. Oh, except that the supply of multifamily housing is artificially restricted because single family homeowners don't want "those people" moving into the apartments next door.

In a place like Phoenix or DC, I predict you'll end up with a lot of bank- or developer-owned condo conversions that will "convert" back to apartments. In NYC, you're screwed.

In Houston, we don't have a problem. The housing bubble never got as hot here (because there's no zoning) and now that it's popped we're seeing an uptick in new apartment construction (because there's no zoning). The 'burbanites are, for the most part, staying out in the 'burbs.

I thihk that renters should consider the fact that their landlords are depreciating their properties (a process unrelated to the true variation of property value) and deducting incidental expenses from their income, as well as expensing mortgage interest. All of this results in a substantial reduction in the cost of operating a rental property. This can (and there is no way of determining the extent to which it does) reduce the rent paid by the renter. These deductions, since they include and go well beyond the mortgage interest, far outstrip the interest deduction allowed the homeowner.

The answer to your question about subsidizing home ownership has nothing to do with economics and everything to do with the obsession of home ownership. Sometimes it makes economic sense, sometimes not. I bought my first house in the Carter era, paid almost 13% interest rate, and sold it 4 1/2 years later for about 10% (net) than I paid for it. Bad timing! Could have made more money investing the down payment, and I wasn't making that much money so the tax deductions weren't all that valuable. I was incredibly busy at work so the "joys" of homeownership were just a hassle. My wife liked it, though.

The problem with today's market is that everyone thought that real estate was a money making machine--not true. My present house in a a market which is tremendously overbuilt--tough to sell even before the crash in the market. There has been almost no appreciation in real estate prices in the last 4 to five years--OK for me, since I have owned the home 20 years, but murder for those who move in, move out.

And yes, the winners in this game were the mega-builders and the farmers who sold their land to the developers. And their buddies on the County Commission who couldn't say "no." The losers were people who had older homes and wanted to "trade up" but need to sell their older home for the equity. Every one wants a new home, despite the fact that they are often much more poorly constructed than a home that is older.

@Phil from CA:

It's likely that my landlord deducts the mortgage interest on *his* house, but that has nothing to do with the complex(es) he owns. Depreciation, Amortization and the deduction of business expenses to determine net profit are standard aspects of the tax code that would remain unchanged even if we eliminated all existing subsidies to homeowners. My landlord depreciates his garden apartment complexes using the same tax code that Chase uses to depreciate its office towers. It's an investment activity completely separate from the single-family market. Commercial property developers do not take out mortgages through Fannie Mae or Freddie Mac.

Homeownership subsidies do not create any kind of "halo effect" for renters. In the long run, the reduction in demand for rental units actually results in less housing choice, since fewer apartments are constructed.

Did you miss my point? To the extent that your landlord passes his tax savings through, you are getting possibly more tax relief than a homeowner with a house valued the same as your rental. The capital gain allowance when the house is resold doesn't have an exact analogue, but there is that 15% max rate for capital gains.

in a capitalist society, evicted homeowners, if they have money, will try to rent, which will give rise to new apartments being built. Supply and demand will balance out. In USA, they evicted homeowners will cry, Slate will write an article on how giving the evicted homeowner a 'bailout' will actually be a bargain, and the people who pay taxes and save money will pay for that bailout with their savings and earnings being diluted. 

A country doesnt become crap in one day. The americans think they can cheat each other and  get away with it. Sadly, that does not work. The fornication that evicted homeowners should get is well deserved, -every stroke of it. 

Just answerings, so you know.

And did you know that more subsidy goes to those making over $75,000/year than to all the section 8 and interest deductions allowed to those making less.

The higher your tax bracket, the more a deduction is worth.

WAT

deductions phase out above a certain income.