TAX SUBSIDIES TO SAVING FOR HOME PURCHASE - EVIDENCE FROM CANADIAN RHOSPS

Large movements in home prices and depressed residential construction in the United States have focused attention on new tax subsidies to ho me ownership in the form of targeted savings incentives for first-time home buyers. while much has been been learned about the effects of th e more traditional tax subsidies to owner-occupied housing and to savi ng, nothing is known about this new type of program. Since the United states has had no experience with such subsidies, this paper analyzes the experience of Canada, which sponsored tax-subsidized savings accou nts for first-time home buyerS-Registered Home Ownership Savings Plans (RHOSPs)-at the national level from 1974 to 1985. The Canadian progra m was relatively popular among households in the prime home-buying yea r's and grew in popularity over time for young households. The average participant contributed to the program for three years and savings th rough the program were a moderate to large portion of total savings by young renter households. In addition, the program had some effect in increasing home ownership among young households. Program participants were substantially wealthier and earned higher incomes than nonpartic ipants. In addition, high marginal tax rate households were more likel y to Participate, even controlling for other measures of saving and we alth. Finally, there is weak evidence that the introduction of the pro gram raised house prices in Canada.