New York and New Jersey are very high-tax states, and the only way the politicians in those states can get away with the tax rates they levy is by getting this de facto subsidy from Washington
Oh terrific: House Republicans might kill tax reform to save the state/local tax deduction
Just because something is popular doesn't mean it's good policy. There are few elements of the tax code more popular than the mortgage interest deduction, but it's terrible policy. It's little more than the federal government subsidizing the interest on your mortgage payments, even though the benefits of your mortgage loan go to you and you alone. We'd be much better off repealing the deduction and lowering rates across the board, but politicians are terrified of what homeowners and Realtors will say if they try it, so the deduction lives.