The MID is widely believed to subsidize home purchases that would mostly have been made anyway, so it scores high on the inefficiency criterion. And since it costs the Treasury about $70 billion a year in forgone revenue, it’s expensive. As the figure shows, it’s distributionally upside down, so it scores no higher on fairness. In fact, it’s a trifecta loser on my three original criteria. Of course, once if you add in political feasibility, it’s a much tougher call, though Fischer points out that numerous analysts have proposed reforms that mend the MID without ending it.
Not that I see any changes being made any time soon. I hear adds supporting the deduction rather frequently on the radio when I check traffic in the morning (and Detroit is probably about the last place that needs the deduction, what we need are more generous and stable rent subsidies given the uncertainty of unemployment for many folks around here). I also here incessantly from lowers at BNIs and other networking groups about events to show support for this deduction and other inefficient housing policies. Supporters of this terrible policy are very well organized and it doesn't help that I've talked to an awful lot of intelligent, educated people who believe buying a house is essential to "stop throwing money away."*
* Of course, with the rent to owning cost ratio where it is owning a home is often a good choice around here; however, I hear from a lot of people who plan to move within a 5 year time frame which tends to be rather high risk financially when closing costs and other risks associated with home ownership are taken into account. I say this despite growing up in a family that moved a lot and did well on home sales despite moving every 3ish years, we were lucky and my parents had some experience as realtors. I doubt this is the case on average with this time frame, outside of the real estate boom years anyway.
[Edit: Added missing link]