Sacred cow: the mortgage deduction

In Germany we don't get to deduct interest on a mortgage from taxes. It does make it a bit less attractive to buy a home. This article exposes an interesting debate on how that deduction might distort housing cost and even land use:

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Problem #1: Subsidizing interest payments encourages people to leverage themselves to the hilt to bet on housing markets. The size of the tax benefit is proportional to your debt. The deduction essentially encourages us to make leveraged bets on the swings of the housing market. That leverage means that housing price swings can easily wipe people out. We are currently experiencing the consequences of subsidizing gambles on housing.

Problem #2: The deduction pushes up prices in places where the supply of new homes is constrained, as it is in many coastal markets....

Read the rest here.