Essays On Housing Tax Policy and Discrimination in the Mortgage Market

This dissertation explores the impact of tax policy and institutions on decisions in the market for housing. The first essay is joint work with Andrew Hanson. In it, we estimate the sensitivity of mortgage interest deducted on federal tax returns to the availability of the Mortgage Interest Deduction (MID). Our primary results show that for every one percentage point increase in the tax rate that applies to deductibility, the amount of mortgage interest deducted increases by $303–590. The second essay simulates changes to average home prices in twenty-seven cities that would result were the MID reformed. I use local variation in housing parameters to simulate home price changes for three different reforms: eliminating the MID, converting the MID to a fifteen percent credit, and capping the MID at fifteen percent. City price changes vary in response to a single policy by as much as 12.8 percentage points. Spatial variation within cities is also notable, with areas high in income experiencing steeper price declines and areas of lower income experiencing shallow declines. The third essay is joint work with Andrew Hanson, Zack Hawley, and Bo Liu. We design and implement an experimental test for differential response by Mortgage Loan Originators (MLOs) to requests for information about loans. Our e-mail correspondence experiment is designed to analyze differential treatment by client race and credit score. Our results show net discrimination of 1.8 percent by MLOs through non-response