Seems to me that they would eventually have to end such a program, and when they end the program, housing prices would just revert back to where they were.
So, lets say today the market value of a home (without the tax break) is $200K. The gov gives a $15K tax break, meaning people would be willing to spend more than $200K on that house – because they aren’t really paying $200K. Lets say market forces bring about a situation where buyer and seller split the 15K so the house is purchased for $207,500. The buyer spends $192,500.
Lets say a few years pass, and the house value doesn’t change. Expected purchase price is still $207K.
Then, the govt nukes the $15K tax benefit. Without the tax benefit, the expected sales price of the house would go back to 200K. The net effect on housing prices is 0.
If the government reduces spending in other places to make up for the $15,000 loss in revenue, I’d be all for it as it would effectively be a tax reduction. I doubt that will happen.
Really, the govt is keeping gov. spending the same, borrowing the money they didn’t get from the buyers, and paying interest on it all for the purpose of keeping housing prices up for as long as the program is in place.
