In most OECD countries, governments provide favorable tax treatment to owneroccupied housing. Usually, imputed rental income on principal homes is not subject to income tax. Mortgage interest payments are also deductible from income tax. Moreover, in many countries the valuation of residential property for tax purposes significantly lags behind real market values [Andrews et al., 2011]. Positive externality arguments are given as the reasons for these subsidies. Homeowners tend to take better care of their property than tenants. Moreover, it is argued that homeowners exert more effort to fulfill civic duty to prevent crime, improve local governance, ect. [Hoff and Sen, 2005]. Therefore, the argument goes, homeownership provides positive externality to the neighbors and thus should be subsidized.