If the Joe Corporation buys a house for rental purposes and takes out a loan to finance the purchase, JoeCorp gets to deduct the interest. If the interest is deductible on a rental property, why shouldn't it be deductible when you're buying your home?
In my heretical moments, I think that all consumer interest should be deductible. There's an economic stimulus that would hit a lot of people who need it the most.
The place where home owners clearly do receive a tax subsidy is with the capital gains exclusion on the sale of a home. Of course, some of those gains aren't real (especially now) -- they're simply inflationary gains over 30 years. You can also make a strong argument that all taxes on capital gains index the underlying asset to inflation.
But that's yet another discussion.