I think you are missing part of Big C's argument. He would allow the deduction on apartments and condos but require capitalization of the interest in single family homes purchased for rental. This would reduce purchases of single family homes as rental properties assuming people are borrowing to pay for them and it would reduce speculative or investment buying since that often entails renting for a time. Big C's proposal would reduce demand for homes by investors and thereby reduce demand for single family homes as investments with the idea that this reduced demand relative to supply would reduce prices. I think that the problem would not be solved by reducing demand because non-investor demand for single family homes is so high relative to price. In addition, investor demand is already reduced because interest and downpayment and credit requirements are higher for investment/rental buyers.