How big a tax advantage do owners have relative to renters?

Bill Wheaton's comment at UCI a few weeks ago continues to haunt me.

Let's ignore financing for a moment (because interest is deductible for both owner-occupants and landlords). According to Morris Davis, Gross Imputed Rent is about 4.6 percent of house value. One is functionally allowed to deduct the value of that income for determining taxes.

The depreciation schedule for rental property is 27.5 years/ straight line, or 3.6 percent of value. Only buildings are depreciable, and in the US, this is about 80 percent of value, so 3.6 percent x .8 = 2.9 percent. Owner-occupants may not deduct operating expenses, while landlords are allowed to do so. Figure this adds another one percent to the deduction. We are at a 4.6 percent deduction for owners, and 3.9 percent for landlords. This is a pretty small difference

But the average owner occupant is almost surely in a lower marginal tax bracket than the average investor in apartments. If the average owner pays a 20 percent marginal tax rate, and the average landlord pays 25 percent, the tax deduction to landlords is actually a little higher than the tax deduction to owners.

Neither owner-occupants nor landlords pay much in the way of capital gains taxes (owner-occupants get a large exemption, while landlords can use exchanges to defer capital gains taxes forever).

The tax treatment of housing still encourages high income people to buy bigger houses than they otherwise might (because the value of the subsidy increases with one's tax bracket), and this is distributionally obnoxious. But given the magnitudes we are talking about, I am guessing the deadweight loss created is pretty small.

I don't think the depreciation allowance for rental housing is unreasonably high: building that are not recapitalized will wear out before age 27.5 (try going without a new roof or furnace for 27 years). So it is not clear to me how the tax code particularly favors housing relative to other investments.