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In many countries, home ownership (meaning owning one's primary residence, instead of living in rented accomodation) is subsidized or otherwise incentivized or supported by the government.

For example (not an exhaustive list, obviously):

Why do these countries provide this special support? I can see a good argument for making sure everyone has adequate housing available, but why provide special support for owning instead of renting? I would have assumed support to be based on the individual housing need, not on the ownership of accomodation.

I am particularly interested in published justification, but other considerations/theories would be interesting as well.

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    The German Baukindergeld is not so much intended to subsidize the home, but to subsidizing starting a family (on the assumption that the middle class is more likely to have kids if they do not need to chose between being able to afford either a home or children). Commented Jan 5, 2023 at 12:47
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    Don't forget the subsidy of not taxing imputed rent. See: vox.com/2016/4/15/11432676/imputed-rent-taxation , businessinsider.com/… , taxpolicycenter.org/sites/default/files/briefing-book/…
    – Nayuki
    Commented Jan 5, 2023 at 19:07
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    One tax advantage in the USA is more theoretical than actual. Most taxpayers will take the standard deduction rather than itemizing their mortgage interest. Commented Jan 5, 2023 at 20:04
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    While that tax advantage does not effectively exist for the whole life of the loan, When I purchased my house, for about the first 2/3 of the mortgage period, the interest was sufficient to make itemizing worth wile. And I had a fairly low interest rate. Commented Jan 5, 2023 at 22:40
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    Another example is Denmark: There isn't any tax on capital gains buying/selling a house you live in (unlike, say, United States). 0%. The interest is also (partially) deductable. Commented Jan 7, 2023 at 13:23

9 Answers 9

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Different reasoning in different societies. Among them:

  • House ownership is far from the only government subsidy affecting necessities. In , there is are reduced VAT rate for food, rent paid by welfare offices, etc.
  • Retirement savings are often subsidized. Often home ownership is a way of retirement saving (take a loan, pay it off over a working live, own it clear in old age).
  • The upper middle classes, who are able to afford home ownership with a subsidy but possibly not without it, are better able to organize their political interest than lower classes. So the political system co-opts them by subsidizing their goal.
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    I wonder where do you live so that upper middle class can only afford home ownership with a subsidy - Singapore?
    – alamar
    Commented Jan 5, 2023 at 14:30
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    @alamar even if the upper middle class can go by without that subsidy... why reject it if they can get it? That way they spend less or get a better home at someone else's expense.
    – SJuan76
    Commented Jan 5, 2023 at 14:48
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    @alamar House in the San Francisco bay area have been priced out of the reach of most middle-class families.
    – doneal24
    Commented Jan 5, 2023 at 19:53
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    @alamar it's very common in the pricier areas of the US and Canada for the upper middle class to struggle to afford a home, {even with} the subsidies. I've got an old college friend in Vancouver, newly minted specialist doctor, makes >C$300K/y(in the 1% in Can), he can't even afford a starter apartment on what's left after taxes and med school debt. Here in Seattle, I have colleagues in tech who are married and make >$500k/y together who are delaying kids, because the daycare costs on top of their mortgage would be too much. Same in SF, NY, LA, Toronto, San Diego, etc. even Austin these days.
    – Eugene
    Commented Jan 5, 2023 at 20:37
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    @MSalters Those 50% are made up to a large part by those who built houses between 1950 and 1990 (and their heirs), when I would agree this was still affordable for average incomes. Since then, the real estate market has become much more difficult, and deregulation of working laws meant that people no longer had a good chance to hold on to their job for life. Thus paying off a 20-years mortgage, even if interest rates have been extraordinarily low for the last 15 years, is much more of a risk than it was in earlier decades.
    – ccprog
    Commented Jan 5, 2023 at 21:01
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In the US, it simply crept in. When the federal income tax on businesses and individuals was created in 1913, it was only natural to treat interest payments paid by businesses on loans to those businesses as business expenses. This was carried forward to interest payments on a mortgage as a deductible living expense.

The initial intent was not to subsidize mass home ownership as initially only the wealthiest Americans were subject to personal income taxes. It wasn't until the mid to late 1930s that the majority of people were made to pay income taxes. The mortgage interest deduction was of course extended to those middle class taxpayers. The 1944 Servicemen's Readjustment Act (aka the GI Bill) explicitly did subsidize home ownership by returning veterans in the form of low cost loans and a mortgage interest deduction that countered the extremely high post WWII tax rates.

The mortgage interest deduction has been changed only one time, and it snuck in as a provision in the 1987 Omnibus Budget Reconciliation Act that caps the mortgage interest deduction at one million dollars per year. (Some call this the "immaculate conception provision" because no one knows the source of this provision.) Ronald Reagan later proposed making the cap even lower, at half a million dollars. The real estate lobby was "deeply disappointed." Reagan's proposed reduction did not make it into law.

If you think the gun or pharmaceutical lobbies are powerful, think again. There are multiple very powerful lobbies (e.g., real estate, home construction, and home repair lobbies) that strongly defend the mortgage interest deduction and other aspects of federal tax law that benefit homeowners. In addition to those vested lobbies, homeowners vote disproportionately compared to renters. It's been estimated that home prices would drop by about 15% should the mortgage interest deduction be removed.

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    Note that interest on all loans used to be tax-deductible. The Tax Reform Act of 1986 changed this, but the mortgage interest deduction was kept because it was politically infeasible to remove it.
    – dan04
    Commented Jan 5, 2023 at 19:23
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    It's been estimated that home prices would drop by about 15% should the mortgage interest deduction be removed => interesting, would you mind adding the source if you remember it? Not that I doubt it's possible but would be curious to see the numbers. Commented Jan 5, 2023 at 19:24
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    Is there a way to tell what percentage of homeowners with mortgages actually itemize their taxes? Don't most people (in low to mid income ranges) just take the standard deduction? Commented Jan 5, 2023 at 20:09
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    "The mortgage interest deduction has been changed only one time" - Didn't the 2017 Tax Cuts and Jobs Act (TCJA) change this again to cap the loan limit to $750,000? Also, I struggle to understand why the real estate lobby would be "deeply disappointed" if a reduction did not make it into law.
    – Glen Yates
    Commented Jan 5, 2023 at 21:31
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    @GlenYates The real estate lobby was "deeply disappointed" that the reduction was even proposed, and then they fought it tooth and nail. Commented Jan 5, 2023 at 21:33
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Whenever a question of the form "Why do governments do this?" we need to "round up the usual suspects."

  • They think it will extend their time in power or increase their control or extend their influence.
  • They think they can make money for themselves or their friends, relatives, associates, etc.
  • They think they can wield it as a weapon against their enemies.
  • They think they can use it to trade favors with people they want to influence or reward.

There are lots of obvious ways that these apply to housing.

  • There is a lot of money involved in houses. If, in the USA, six million families buy a house in a year this is getting into the range of $Trillion.
  • The six million families have corresponding numbers of people who vote. Both family members who live in the houses, and their friends and relatives who are glad for them
  • There are large numbers of jobs involved in building and renovating houses. These people vote.
  • Houses involve mortgages which in turn involve banking and accounting regulations and tax law. Pushing housing allows the politicians to get leverage over these other aspects and industries.

The harm that subsidies may do is pushed into the distant future, and hidden by layers of action. For example, if the mortgage market is distorted by subsidies, the increase in interest rates and bankruptcies may not happen for years. And it may be possible to obscure the connection. Until the result is the sub-prime crisis of 2007-2008.

So increasing housing gets them votes from trades workers. And favors from cities that get to increase property tax on houses. And loss of the subsidies can be held as a threat against people who might try to oust the politicians who could remove the subsidy.

A distorted housing market screws up the banking industry. Which is good for politicians because now they can recycle the whole process to "rescue" the banks.

These are examples of principles that are at work. The fact that they work the way the politicians like is evidenced by the fact they keep doing them. The fact that they don't work they way they say they are intended is evidenced by the fact that the housing market in subsidized locations is distorted beyond all recognition. Again, recall the 2007-2008 sub-prime crisis.

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    I said $1 Trillion. fred.stlouisfed.org/series/ASPUS It's pushing $3 Trillion. In the last two years the average sale price of houses in the US has risen by about 40%. This is kind of alarming.
    – Boba Fit
    Commented Jan 6, 2023 at 20:01
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    Alarming as in: end of the USD as we know it. Collapse of the global economy. We all starve to death as nobody can agree to allocate fertilizer and food. Well, that's just one possible outcome. A different possibility is everyone who bought a house in the last two years becomes 60% poorer, and everyone who didn't carries on. Commented Jan 7, 2023 at 5:07
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    Cynically, there's also the factor that right-wing governments often seek to destroy anything state-funded, such as state-owned or social housing, and encouraging home ownership may go alongside that. The attack is either explicit, as when the British government in the 1980s sold off state-owned homes to tenants, or implicitly, so they can cut social housing but point to relief for home-owners as an alternative way of helping people have housing.
    – Stuart F
    Commented Jan 9, 2023 at 11:17
  • @StuartF So a government that tries to decrease its net size is "cynical." OK then.
    – Boba Fit
    Commented Jan 9, 2023 at 13:05
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Other answers have addressed the economic and political aspects of why a government may incentivize homeownership. However, there are sociological reasons as well. These stem from the idea that one of the primary purposes of government is to ensure social stability.

One example of this is the institution of marriage. The theory goes, by making possibly restless young people focused on domestic life, they're less likely to commit crime, join revolts, cause trouble etc. And on the positive side, having stable emotional relations with another person is likely to improve their psychological state. Part and parcel with this is the concept of the household. If the government thinks marriage will improve stability, and having houses for married couples improves their stability further, it makes sense for the government to incentivize home buying.

Ok, but why would having a house be a stabilizing effect on someone's life? Here are a few possible reasons and their references:

  • Less risk of being unhoused: Once the mortgage is payed off, the home is owned. If the person gets laid off, they don't need to worry about affording rent.
  • Less financial risk: The home itself can appreciate in value and also provide collateral for loans in situations that might otherwise be financially ruinous.
  • Less health risk. More communal house may be of poorer quality, impacting health outcomes. While this might not be as large of a factor now, consider the situation in the early-mid 1900s where urban rental stock was probably from the 1800s, ie without modern construction and health regulations.
  • Greater educational attainment (possibly US specific reason): Schools are largely funded locally and you can typically only send your child to public schools in your district. Once initial affluent single family home communities are established, the public schools systems in those communities were better than their rural or city counterparts. This leads to better eduction outcomes for any children a person might have. Obviously, a person renting could still send their child to a school in the same community if they were geographically close, but having a home ensures your child will stay there.
  • Greater community building. Simply knowing your neighbor, and knowing that they will be there for a while changes how you interact with them. There's no reason a rental building, or person living in rental units can't also have a sense of community, but its more likely that people will move in these situations, which makes it harder to form lasting bonds.

Finally, since you were looking for publications, one further link I'll provide is this study conducted by the National Association of Realtor's Research division. It goes through many of the reasons described above, and adds others.

*Caveat! All the sources I have used have their own bias. Habitat for humanity and the Association of Realtors obviously have their own reasons for wanting houses to seem good.

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    "ensure social stability". This was exactly my first thought. It's great to stimulate the economy, but not too many people rebel if it means their own property gets trashed.
    – RonJohn
    Commented Jan 6, 2023 at 19:54
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    @RonJohn or even if their debt load goes down! I think that's the real reason for mortgages: it means that anyone who dares to defy the system gets punished very severely. Commented Jan 7, 2023 at 5:09
  • @user253751 I really don’t think the first companies issuing mortgages were thinking about social stability.
    – RonJohn
    Commented Jan 7, 2023 at 13:14
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    @user253751 there is no Deep State “real reason” conspiracy. “They” are just taking advantage of the situation.
    – RonJohn
    Commented Jan 7, 2023 at 20:39
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    There are of course other ways of ensuring stable housing, such as long-term tenancies (some countries like the UK formerly offered life-long tenancies in state-owned housing), or restrictions on landlords' activity. But these carry both cost to the state (building, running houses) and infringe on the activities of landlords who by their nature are often wealthy and politically active.
    – Stuart F
    Commented Jan 9, 2023 at 11:19
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I live in Norway, where owning your own apartment or house, is almost seen as a universal right, and there are very strong tax incentives. Renting an apartment or house is very rare. Most people in Norway spend a lot of time indoors, especially during winter.

I believe the most important arguments for incentivising people to own their own house or apartment are:

  1. You do not need to ask for permission for modifying your house or apartment, as long as it's within building codes. This includes any modifications you yourself need or want, even if it would reduce the sales value of the property.
  2. There isn't any need to fight the landlord to get him/her to fix broken things, paint, or do cosmetic changes. You can simply do so yourself whenever you want, or when you can afford it.
  3. Any improvements you do will benefit yourself, and not the landlord. If you do improvements, you get a higher price when/if you sell.
  4. Being able to do modifications without asking for anyone's permission, means you don't have to move to another house or apartment as often as if you couldn't change it.
  5. When you pay your mortgage, you are saving for yourself. When you pay rent, you save money for the landlord.

The first four arguments are mostly about quality of life for individuals and families. But having properties properly taken care of by interested owners, will obviously be positive for the society at large too.

The fifth argument is the most commonly cited argument by Norwegians, but probably mostly makes sense from an insider perspective, where the incentives already are in place. I do not think it is a particularly good argument for changing government policy (but I do believe the first four are).

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    This are arguments for a person to become an owner, but doesn’t answer why a government should incentivize such ownership.
    – breversa
    Commented Jan 6, 2023 at 15:15
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    I am not trying to convince a dictator about the benefits of home ownership. In a democracy, the government should represent the will of the people. If something is good for individuals, the government ought to support it, unless there are good reasons not to.
    – Jo Totland
    Commented Jan 6, 2023 at 16:41
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    @JonathanReez homeowner associations that govern whole areas of multiple homes are very unusual outside of the United States. Usually a HOA only governs a single multi-tenant apartment building.
    – Philipp
    Commented Jan 7, 2023 at 1:05
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    @Philipp right but they’re still managing apartments in Norway I presume? And if you’re in an HOA you’re effectively not a true “home owner” Commented Jan 7, 2023 at 3:00
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    The transaction costs are also very high, 5% - 20% of the property's value, so you are effectively stuck in the same place for at least 10 years. (For example, what if the neighbours are naturally noisy?) Commented Jan 7, 2023 at 13:39
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One special case is Russia, where over 70% people own their homes.

Everybody knows that in early 90s, Russia was basically stolen by thugs who privatized state enterprises via opaque and corrupt process.

Not everybody knows, however, that in the same 90s, Russia also privatized state-owned homes (apartments especially) - the one apartment that you have, de jure, rented from the state at the end of Soviet period, you could now own, just by submitting some paperwork. Then you could sell it, rent it out, etcetra.

So in this case, apparently, personal home ownership can be viewed as a sort of agreement between the government and the masses - the government gets to decide what to do with means of production by giving homes for the masses to own.

Curiously, some research pieces which claim very high wealth inequality in Russia exclude the homes owned by Russian citizens from the equation. Obviously, most of the wealth owned by most of the people is their home(s), usually in the form of apartments.

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    Countries that were never Communist also exhibit this phenomenon, such as the USA. Commented Jan 7, 2023 at 5:11
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Purely from an economical perspective:

  • House ownership is a form of retirement saving: people are more willing to put aside money in a house loan than on a long-term investment account, so let's promote this way of saving.
  • House ownership incentivizes people to improve their standard of living, i.e., by renovating, insulating, repairing the house. A home owner who rents out the house has little motivation to make the house energy-efficient, as the heating costs are for the renter. The renter on the other hand knows he can be evicted, so an expensive renovation that yields benefit only in the long run is risky. Owning your own house solves this, and benefits society as well (e.g., less dependence on polluting foreign fossil fuels).
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Things that were not mentioned, but IMO worth adding:

  • Renting is business. At the end of the day landlord is in for revenue, thus "renting is cheaper" is not true in general, and especially if you factor in the fact that after mortgage is payed out you are left with the asset. Government subsidizing ownership is making sure "richer" don`t get to make income from poorer, and family home is the inheritance children get, which is also significant.
  • Land lords have no incentive to compete on price, thus making ownership another option is creation of that competition, or making it stronger.
  • Land lords don`t have much incentive to sell their property, nor to buy more, packing people more for more rent revenue
    would be their preference, which is bad for almost everyone, but
    building industry especially.
  • Here is the funny part, land lords are interested in high ownership rate. Local goverments and even countries also are. The reason is, this reduces mobility. People are less likely to move or migrate if they own their home, which reduces
    possibility that local communities become deserted, if economic
    downturn starts. Obviously land lords don`t want their expensive
    property to become useless due to large outflow from a particular location, so is local government.
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    I'm not sure I follow most of your arguments here. Commented Jan 8, 2023 at 19:12
  • The last one is a killer one, in Russia you can charge close to median wage for a decent rent-out flat, since most of the workforce owns their apartments and don't have to rent at market rate. You can live off of one property if you are a retired landlord.
    – alamar
    Commented Jan 10, 2023 at 13:38
  • While these points may or may not be true, I don't see how this answers the Q. The question was why there is government support for owning a home, not what the problems are with renting.
    – sleske
    Commented Jan 11, 2023 at 10:47
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I'll add two points to all the other good answers here: political goodwill and tax revenue.

Everybody wants to own a home one day. A government policy supporting this desire obviously earns the goodwill of such voters.

... but why provide special support for owning instead of renting?

To increase tax revenue - home owners in most countries pay some form property tax that contributes to a local government's budget, and the more property owners there are, the more tax the local government body earns. Also, note that you need homes in the first place to rent it out. So government policies that incentivise building new homes theoretically also help by preventing rents from rising, resulting in cheaper accommodation.

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    "To increase tax revenue... property tax" - I cannot follow here. No matter whether people own or rent, someone will own the home, and pay tax, so I do not see how owner-occupied homes would make a difference.
    – sleske
    Commented Jan 11, 2023 at 10:50
  • @sleske If the government offers you assistance to rent a house, only the rent-owner pays the property tax. If the government helps you own your own house, now the government has two sources of tax revenue - you and your former rent-owner.
    – sfxedit
    Commented Jan 11, 2023 at 23:32

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