Suddenly, the home mortgage deduction became a very big program. The expansion of the program was exponential. Just consider the combination of rising home ownership, lower down payments and longer-term loans, and a sharp rise in the numbers of households itemizing tax deductions. The policy snowballed and literally fed itself, leading to higher homeownership rates and higher home prices, all at a greater expense. The higher the homeownership, the larger the tax benefits, the more the policy engrained itself into the fabric of the economy to the point that it is virtually unretractable.
Some politicians seem to have no problem seeing the golden goose slowly starve, however.
Another strategy through the years has been to raise the standard deduction in order to distance the home mortgage interest deduction from a larger portion of the tax base. Nonetheless, the deduction remains an ingrained part of every homebuyer's decision to purchase a home. There are many disadvantages to owning a home, particularly its illiquidity as an investment. However, homeownership retains its status as the ultimate household investment. Now, when one considers the non-market cost of the loss of household mobility associated with homeownership, as well as the cost of property taxes and upkeep of a house, the decision to own versus rent is not always clear cut.