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Housing

The federal government plays a substantial role in the housing market. Fannie Mae and Freddie Mac purchase and guarantee loans from banks and other lenders, and the Federal Housing Administration and some other agencies increase the availability of mortgages by assuming most of the risk of default on loans to eligible home buyers. In addition, the federal tax code encourages home ownership by allowing deductions of mortgage interest and property taxes and excluding most capital gains from taxation when a home is sold. CBO's work (including its analysis of Fannie Mae and Freddie Mac) assesses the effects of those policies and the impact of legislative proposals regarding the housing market.

Sub-Topics:

  • Housing Market Crisis
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H.R. 6429, STEM Jobs Act of 2012

cost estimate

November 28, 2012

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Taxation of Owner-Occupied and Rental Housing: Working Paper 2012-14

working paper

November 5, 2012

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Abstract

Larry Ozanne

This paper illustrates how the different tax treatments of owner-occupied and rented houses affect the relative costs of owning and renting. In the examples, a representative landlord computes the rental rate (the ratio of the rent to the value of the house) required to break even on an investment in a house. Potential homeowners compare that market rental rate as a tenant with an implicit rental rate that reflects the cost of owning a home.

The tax advantages tend to make owning more advantageous than renting for higher-income households, but lower-income households can find renting cheaper than owning. The paper also illustrates how limiting or eliminating certain tax advantages would change the cost of owning relative to renting. While the precise comparisons are specific to the conditions detailed in the examples, their general implications are broadly applicable.


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S. 65, Hawaiian Homeownership Opportunity Act of 2011

cost estimate

October 24, 2012

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H.R. 5747, Military Family Home Protection Act

cost estimate

September 21, 2012

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H.R. 6361, Vulnerable Veterans Housing Reform Act of 2012

cost estimate

September 14, 2012

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S. 3085, Responsible Homeowner Refinancing Act of 2012

cost estimate

August 24, 2012

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Modifying Mortgages Involving Fannie Mae and Freddie Mac: Options for Principal Forgiveness

CBO examined three options for Fannie Mae and Freddie Mac to use principal forgiveness for certain underwater borrowers. How would those options affect the number of mortgage defaults, the federal budget, and the overall economy?

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H.R. 4482, a bill to amend title 38, United States Code, to make permanent home loan guaranty programs for veterans regarding adjustable rate mortgages and hybrid adjustable rate mortgages

cost estimate

May 24, 2012

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H.R. 2446, RESPA Home Warranty Clarification Act of 2011

cost estimate

May 14, 2012

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CBO Releases Report on the Troubled Asset Relief Program—March 2012

blog post

March 28, 2012


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