Tax codes treat rental property as a business for which there are numerous deductions not available to homeowners.

May be true in your area, not so in others. In some areas business property is subject to substantially higher property tax than personal property.

Whether the owner deducts maintence and repair expenses from taxes or not, he still charges them to the renter. Advantage: ownership.

The tax deduction for mortgage interest is a huge fraud in that a truely astonishing number of homeowners cannot claim it. You have to itemize deductions to do so and for many the standard deduction is high enough the even the mortgage interest doesn't trip that wire.

But seriously, wasn't home ownership one of the foundations of "The American Dream"? Are we ready to abandon that as a concept now and replace it with, dare I say it, hope and change? Mybe it's not fair, but it seems as though Mr. Klein is advocatin a generation of urban sharecroppers, people who are going to work just to put equity in someone else's pocket.

I'd like to hear any evidence whatsoever on this point. For the individual, home borrowership is actually a tremendous financial burden in the form of a high leveraged speculative real estate bet. Since in the long run average home values do not outpace inflation, it makes far more sense for the person in their early adulthood to use their money to start a business, or do any other thing which has positive returns, instead of buying a house.

I cna give some personal experience ones that would lend to supporting that, but its confined to Los Angeles suburbs (Glendale, Burbank, La Crescenta, and the South Bay). Of coruse it helps they bought in the right areas, not many places can boast hosues that went for under 50k in the 70s selling nowadays for 1m+ (one of my engineering professors used an example of not buying the beach house he was renting as a student in Manhattan Beach from his landlord for 30k to explain why he didn't teach business classes).

The impetus to become an owner is purely social

Uh, not exactly. In fact that's really the topic of this post. There are strong financial incentives to own your own home and have been ever since such a large proportion of the population began paying income taxes. That was after WWII and I think that the correlation between the incidence of the income tax and the rise of suburbia is more than an accident.

I don't honestly know whether a citizenry composed of owners is a better one or not. Jefferson certainly thought so. I would like to remove the tax incentives from home ownership so that we could disaggregate some of the demand factors and start determining whether it's the case.

Without the subsidy, there's no strong evidence that this state of affairs would persist - far more people who are old enough or rich enough to own would decide to rent, because it clearly does make more financial sense in many areas at many times.

And, James, I have a real hard time believing your claims about profit - it's unlikely you're fully accounting for your costs, especially including property taxes and home repair. (I'm paying out $3000 or so right now in the aftermath of a hailstorm here; my insurance company is paying out $5000 or so; and, of course, I can't forget the premiums I paid, too). People get some value out of owning besides the purely economic, but let's get real: it's rarely an overwhelming win on purely economic bases without the subsidy.

Nope. Tax codes treat rental property as a business for which there are numerous deductions not available to homeowners.

"For the individual home ownership is a major step in financial security"

I'd like to hear any evidence whatsoever on this point. For the individual, home borrowership is actually a tremendous financial burden in the form of a high leveraged speculative real estate bet. Since in the long run average home values do not outpace inflation, it makes far more sense for the person in their early adulthood to use their money to start a business, or do any other thing which has positive returns, instead of buying a house.

"I wonder if Mr. Klein has considered whether a more mobile population might actually accelerate the decline of neighborhoods due to bad schools"

Evidence suggests that the opposite is true. The urban neighborhoods with the highest proportion of owners are also frequently the worst, most benighted areas of town. Here in California I point to West Oakland, Bayview/Hunters Point, and Compton. Nobody rents a house in Compton. They are all owner-occupied. It is also not the type of place you'd like to live.

Looking at the whole planet, you'll find that there's no correlation at all between owner/renter ratio and literacy or crime in a nation. The impetus to become an owner is purely social, something that Americans made up out of thin air several decades ago.

I have a hard time interpreting the home mortgage deduction as a real subsidy. There is no outflow of cash to the homeowners and when talking subsidies the layman thinks in those terms. I know the deduction saves the taxpayer money but it was their money to start with.

Clearly the benefits outweigh the costs for this program as others have pointed out. For the individual home ownership is a major step in financial security and that is good for society in general.

If Klein needs a dragon to slay (he seems to always) there are much bigger and better ones. Having no stake in this argument (not enough interest to deduct) I still see the current system as the best way to go.

The fact that encouraging home ownership encourages social stability is, in fact, where the rubber meets the road as far as the public policy goes.

Indeed... It also has the distinct disadvantage, politically and socially speaking, of discouraging social change. And you'll recall change is all the rage just now.

But more, I am suspicious; what, exactly, would we be changing to? Well, it seems clear that owning a home doesn't work well, if the plan is for as many as possible to cram themselves into the cities.

And since this population redistribution and social change is the oft- spoken of wet dream of liberals such as Krugman... and to a lesser degree, I suppose, Klien... (Harumph)

And I should also note Yglasias making a similar argument not long ago.