This paper analyzes U.S. time-series data in order to study the determinants of the choice between renting and homeownership. Special attention is focused upon changes in the relative prices of owning and renting induced by provisions of the federal personal income tax. The results suggest that about one-quarter of the growth in the proportion of homeowners in the post-World War II period is a consequence of the tax system's favorable treatment of owner-occupied housing.

[This paper analyzes U.S. time-series data in order to study the determinants of the choice between renting and homeownership. Special attention is focused upon changes in the relative prices of owning and renting induced by provisions of the federal personal income tax. The results suggest that about one-quarter of the growth in the proportion of homeowners in the post-World War II period is a consequence of the tax system's favorable treatment of owner-occupied housing.]