##ing that additional reforms are needed. fout! onbekende naam voor documenteigenschap. figure 6 : contribution of mid to marginal costs of housing investment. graph taken from ec ( 2014 ) tax reforms in the eu 2014 link. why macroprudential policy and taxation are both substitutes and complements taxation in most countries favors owner occupied housing. in some cases very explicitly so, via mortgage interest relief, as you can see in figure 6. in other cases, because housing wealth is taxed much less than other sources of wealth. tax systems therefore generally contribute to cyclicality instead of containing it. macroprudential policy is therefore often partly in place to offset the negative elements of the taxsystem. this is the most clear when the tax system induces a debt - bias, as it does in various countries that still offer mortgage interest deduction. however, in fact it also holds when the tax system favors investment in housing over other sources of wealth. in most countries, the idea that homeownership is the preferred tenure for all households, is still deeply embedded in society. from an economic perspective the case for homeownership over renting is much less clear. the often mentioned pros, like better maintenance of properties, and cons, like less labor mobility and more debt - are at best in balance. from a fiscal perspective i therefore believe that countries should strive to move to a tax system that is more or less neutral towards homeownership. not only does this benefit financial and macroeconomic stability via structurally lower debt and real estate prices. it also creates a level playing field for private rental housing. currently, the supply of housing in this segment of the market is often suboptimal. in my country this segment still dominated the housing market in the post - war years, but now only makes up a small fraction of the total housing stock. so yes, i believe that proper real estate taxation and macroprudential policy are to some extent substitutes. but fiscal incentives are not the only source that can amplify residential real estate cycles. the feedback loop of adaptive expectations of house price growth remains another source of risk. exuberance leads to more exuberance, panic to more panic, also when taxation does a better job than it does today. macroprudential tools such as dsti - and ltv - limits can structurally limit this mechanism and at the same time protect households from over indebted

. you can see this in figure 1. est deu ltu hun lva svn cze pol svk ita aut grc jpn usa bel fra fin prt gbr can swe aus nld nor dnk figure 1 : household debt as a percentage of net annual disposable income. oecd data from world war ii onwards, housing policy in many countries became very much geared towards promoting homeownership. this worked via both favorable tax treatment of housing, and the deepening of mortgage markets. homeownership rates have in almost all countries been steadily on the rise. the dutch case is by no means an exception. in this keynote i would like to share the long experience that my country has with tax relief on mortgage interest. or, as i will refer to it today : mortgage interest deduction. but also our experience with the new macroprudential tools that were introduced after the global financial crisis. i believe the dutch case is an interesting example of the distortive power of mortgage interest deduction. and it clearly illustrates why macroprudential policy is especially needed in such an environment. first, i would like to look back at over a century of mortgage interest deduction in the netherlands, up until the global financial crisis. second, i will take some time to discuss what measures were introduced in the wake of that crisis. third, i will discuss in a broader context how i believe macroprudential policy and real estate taxation should ideally work together in stabilizing housing fout! onbekende naam voor documenteigenschap. markets. it is in this third part especially that i hope we can combine all insights, thoughts and experiences. the dutch experience up until the global financial crisis in the netherlands mortgage interest deduction was introduced already in 1893, by our minister of finance at that time : nicolaas pierson. he overhauled the tax system and shifted the tax base from mostly indirect taxation towards sources of income. in this new system, a house was seen as a source of income. rents or imputed rents were therefore taxed, and costs like interest payments could be deducted. already back then, on a net basis most homeowners and landlords with a mortgage loan received a subsidy, since the rental income was taxed relatively lightly. however, the effects of mortgage interest deduction in the early decades were still relatively contained. because homeownership rates were