WASHINGTON: Every home owner and practically every aspiring owner knows that one of the great benefits of ownership is the subsidy granted under the U.S. tax code.

But many of us fail to realize that those blessings are hardly distributed uniformly. For one thing, those who can afford the largest properties get the largest share of the write offs. Indeed, many owners don't even get to claim the deductions because they don't itemize on their tax returns.

That may or may not be news. But according to a new report done for the Brookings Institution, a Washington think tank, the tax benefits of home ownership are "highly skewed" geographically as well.

The study by two professors at the University of Pennsylvania's acclaimed Wharton School, Joseph Gyourko and Todd Sinai, found that while California is home to 10 percent of the nation's home owners, the state captures a whopping 25 percent of the tax benefits.

The authors also found that just three metropolitan areas New York City-Northern New Jersey, Los Angeles-Riverside-Orange County and San Francisco-Oakland-San Jose receive more than three-quarters of the net total tax benefit.

And they also say the tax-preference for owner-occupied housing results in a net transfer of money out of the central cities and into the suburbs.

Their report, "The Spatial Distribution of Housing Related Tax Benefits," found that even based on 1990 data, the tax benefit afforded home ownership is huge an estimated $164 billion nationally.

Mathematically, that works out $2,802 per owner and $1,815 per household. But arithmetic doesn't cut it when it comes to the tax code:

• Unless your deductions for mortgage interest and property taxes exceed the standard deduction granted to every taxpayer, even renters, it often doesn't pay to claim them, so many people don't.

• The more you pay in interest and property taxes, the more you can deduct. The current limit on mortgage interest is $1.1 million, and there is no ceiling on the property tax write-off.

As a result, authors Gyourko and Sinai point out, the bulk of the benefits flow to relatively few owners. In fact, 10 percent of all home owners receive 34 percent of the aggregate gross benefit, and 50 percent receive nearly 80 percent.

Moreover, they found that only in 12 cases does a state's share of the gross benefit exceed it's share of the nation's owner-occupied dwellings. And California, which reaps $41.5 billion in benefits, isn't the biggest gainer. That distinction belongs to Hawaii, which has an even higher benefit ratio, taking a 1.1 percent share of the total benefit though it has just 0.3 percent of the owned units.

On average, the value of tax benefits per owner-occupied housing unit in 1990 was $9,181 in Hawaii. And the District of Columbia was second at $7,535, followed by California at $7,198. By contrast, the mean annual benefit paid to poor families in 1995 under the Aid to Families With Dependent Children program was $4,524.

Other big winners: Connecticut, $6,200; New Jersey, $5,482; New York, $5,264; Massachusetts, $4,930, Maryland, $3,990, Rhode Island, $3,911, New Hampshire, $3,214; Virginia, $3,115 and Delaware, $2,985.

And the big losers? The most populous is Texas, where the value of tax benefits to the state's six million home owners was just $1,334. But in South Dakota, it's even worse. The write-off there was worth only $775 per owner.

For more articles by Lew Sichelman, please press here.

Published: August 15, 2001

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