Homeowner Subsidy Repeal and Housing Recentralization

Abstract

Subsidizing homeownership decentralizes cities, so Muth (1967) suggested over half a century ago. This paper’s interest is in the related question of whether repealing a homeownership subsidy recentralizes cities. This question is relevant today, given homeownership subsidies’ ubiquity. We provide a first quasi-experimental test of a subsidy repeal’s spatial effects by turning to Germany’s 2005 homeownership subsidy reform. We find that repealing the subsidy contributed to recentralizing Germany’s cities. Inasmuch as recentralization helps abate carbon dioxide emissions, repealing a homeownership subsidy also helps mitigate global warming.