Galina Tachieva of DPZ argues that targeting mortgage interest deductions to benefit infill development and denser living would be an effective way to fight sprawl.
On her new blog, Tachieva, author of the Sprawl Repair Manual, says that reducing the mortgage interest deduction overall (as President Obama has suggested) would be less beneficial to cities than a targeted deduction aimed at those in larger, suburban houses that use more energy and infrastructure:
"The MID could be reduced for all properties except those in locations targeted for sprawl repair and redevelopment. This would create a strong incentive for people to buy and build in places that need infill and densification. If that action proved to be politically unfeasible, the MID could be increased for investments in sprawl repair sites, such as dead malls that could be transformed into mixed-use town centers and failing commercial strip corridors that could be made viable as transit-oriented boulevards."
FULL STORY: Reduced or Not, the Mortgage Interest Deduction Can Help Fix Sprawl

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Appalachian Highlands Housing Partners
Gallatin County Department of Planning & Community Development
Heyer Gruel & Associates PA
Mpact (founded as Rail~Volution)
City of Camden Redevelopment Agency
City of Astoria
City of Portland
City of Laramie