Homeownership subsidies and the housing market: the effects of a policy reform in the Netherlands

In 2017, the Dutch government started to reduce the maximum deductible amount of home mortgage interest from taxable income. The effects of this policy reform on the average housing prices and the homeownership rate are still uncertain. Based on the effects of a similar policy reform in Denmark, a prediction for the Dutch housing market is made. Data on the housing prices in the Netherlands and Denmark in the period 1980-2018 and data on the Dutch homeownership rate are used to come to a prediction. This prediction consists of two main components. Firstly, it is likely that the policy reform will decrease the average housing prices. Furthermore, it is likely that the homeownership rate will remain unaffected.