William G. Gale (Co-Director, Tax Policy Center), Jonathan Gruber (MIT) & Seth Stephens-Davidowitz (Ph.D. student, Harvard University) have published Encouraging Homeownership Through the Tax Code, 115 Tax Notes 1171 (6/18/07).  Here is the abstract:

Americans are taught from an early age to aspire to homeownership, and several long-standing federal institutions and regulations support owner-occupied residential housing. The income tax deduction for mortgage interest payments is possibly the best-known federal housing policy. Evidence suggests, however, that the mortgage interest deduction (MID) does little if anything to encourage homeownership. This paper proposes a tax credit and a subsidized saving vehicle for first-time home buyers, financed by the elimination of the MID. Relative to current policy or to the President’s Advisory Panel’s recommendations, these proposals would be less expensive, more progressive, and more effective in encouraging homeownership.