Does the Federal Tax Treatment Of Housing Affect the Pattern Of Metropolitan Development?

To encourage home ownership, the United States tax code treats the financing and sale of housing differently from most other goods. For example, the interest payments on your home mortgage and your property taxes are deduct-ible from your federal income taxes while the interest on your credit card bill for your vacation to Paris is not. Furthermore, the profit you make on the sale of your house may be exempt from capital gains taxation, but similar profits on your mutual funds are not. These special provisions in the tax code–the deductibility of mortgage interest and property taxes from federal income taxes and the special treatment of capital gains on the sale of owner-occupied housing–effec-tively lower the cost of owner-occupied housing relative to other goods. Lowering the after-tax cost of owner-occupied housing favors home ownership because it gives owning a financial advantage over renting for higher income house