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Brief

How Did the Tax Cuts and Jobs Act Of 2017 Affect the Housing Market?

Robert McClelland, Livia Mucciolo, Safia Sayed
March 30, 2022
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Abstract

The Tax Cuts and Jobs Act of 2017 (TCJA) dramatically changed tax law, including how taxpayers deduct the interest on their home mortgages. It narrowed the deduction in several ways, so we would expect new mortgages to be smaller than old ones. But it also raised most taxpayers’ after-tax incomes, which means they had more money to spend on mortgage interest. Our research separately estimates how the TCJA affected mortgages and house prices. We find that the tightening of the deduction reduced mortgages, but the increase in after-tax income offset that effect. We also find that larger mortgages raised home prices. Putting all our results together, we find that the overall effect of the TCJA on home prices was close to zero, although some areas saw small increases and others saw small decreases.

Research Area

Federal Budget and Economy Economic effects of tax policy Individual Taxes Homeownership
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Meet the Experts

  • Robert McClelland
    Senior Fellow
  • Livia Mucciolo
    Research Analyst
  • Safia Sayed
    Research Assistant
Research report

New Evidence on The Effect of The TCJA On the Housing Market

Robert McClelland, Livia Mucciolo, Safia Sayed
March 30, 2022
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