"Another cause of this relentless upsizing is that the government unwisely promotes it. In 2005, about 80 percent of the estimated $200 billion of federal housing subsidies consists of tax breaks (mainly deductions for mortgage interest payments and preferential treatment for profits on home sales), reports an Urban Institute study. These tax breaks go heavily to upscale Americans, who are thereby encouraged to buy bigger homes. Federal housing benefits average $8,268 for those with incomes between $200,000 and $500,000, estimates the study; by contrast, they're only $365 for those with incomes of $40,000 to $50,000. It's nutty for government to subsidize bigger homes for the well-to-do."Why don't liberals make proposals here? (Samuelson just points with alarm but doesn't make suggestions like the following.) From H&RBlock:
If you take out a mortgage to buy a second home, the interest is deductible if the mortgage is secured by the home and you itemize deductions. Your deduction may be limited if the mortgage exceeds the fair market value of the home or if the mortgages on your main home and your second home exceed $1 million ($500,000 if you are married, filing a separate return).Granted, these days $1 million doesn't buy as much of a home as it used to. But my great grandfather had a cabin that was about 600 square feet, with 7 people (mother-in-law, wife, four kids). I'd think 500 square feet per person is a very reasonable cap. Limit deductibility of interest to the lesser of $1million or interest on the average cost of a home in the ZIP code sized to the number of dependents reported x 500 square feet.
There's no way the taxpayers should subsidize beach houses, ski houses, etc. This issue appeals to the populist instincts we still have.