Consequences of reducing deductibility of mortgage interest for the housing market

This study analyses the consequences of a reduction of the deductibility of mortgage interest for the housing market using a stylised model of the housing market. We use the model to assess the effects of one possible modification of the fiscal system, in which interest deductibility, the taxation of imputed housing income, and the conveyance tax are all abolished. The results are subject to considerable uncertainty. The fall in the price of dwellings resulting from the combined fiscal changes varies from 4½% tot 13½%, depending on how households adjust to the regime change, while the stock of owner-occupied dwellings decreases by 3½% to 10½%, relative to the scenario of no change in fiscal rules.

This publication is in Dutch.