The Tax Cuts and Job Acts proposed by Republican leaders in the House of Representatives would eliminate homeowners’ ability to deduct interest paid on mortgages that exceed $500,000.
Currently, people with mortgages of up to $1 million can deduct interest payments from income subject to federal taxes.
But, basically, anybody who’d be paying more than $625,000 for a home would be in the cross-hairs of pain, and, importantly for housing and the economy, a disincentive.
Housing leaders and business stakeholders expect to get a look at a Senate proposal for tax reform today, that 1). might be a whole lot more encouraging with respect to supports for homeownership, and 2). might be a lot closer to the mark in terms of tax reform legislation that the administration will support.
Last week, the CEOs of a number of the larger single-family enterprises were in Washington, D.C., calling directly on elected officials on Capitol Hill with their concerns about the House version of the plan, which proposes to dismantle economic policy supports for homeownership that have been in place for decades.
While the bigger companies in residential construction believe there are positives in the GOP House tax bill draft in terms of impacts on economic growth and hiring, leading builders are aligned and united with other housing and finance business groups who oppose the hits on financial support for middle-class homeownership.
“Now is exactly the wrong time to be pulling back on housing and homeownership incentives, especially given the very gradual, very tentative traction the recovery has, and the labor challenges it faces,” said Ken Gear, CEO of the Leading Builders of America. “We’re totally aligned with our housing industry association partners on support for homeownership and incentives for homeowners.”
National Association of Realtors president William Brown had this statement about the GOP bill draft.
“Eliminating or nullifying the tax incentives for homeownership puts home values and middle class homeowners at risk.”
And yesterday, after reviewing the full text of the legislation working its way through committees in the House, National Association of Home Builders CEO Jerry Howard reaffirmed his group’s opposition to the bill. He told Business Insider staffer Akin Oyedele that the bill is not only an attack on housing for middle-class Americans, but could precipitate a destabilization of housing markets around the country.
“You’re talking about potentially causing housing recessions in some of the biggest markets in the country, and those kinds of recessions tend to have spillovers,” Howard said. “We’re worried about a national housing recession.”
According to a Brookings Institution analysis, the MID policy change would directly impact about 3% to 6% of mortgages–ones greater than $500,000. But, it says, impacts in some metro areas could be much larger.
The greatest potential impacts would be on metros in coastal California and Hawaii, where more than half of homes are valued above $625,000. In New York City, Washington D.C., and Boulder, Colo., more than one-quarter of houses could be affected.
Policy-wise, it appears that the GOP-majority House wants to divide-and-conquer, pitting expensive urban areas against less expensive more rural-dominated area against one another as regards the costs and benefits of a tax reform strategy.
Housing’s leaders–be they leaders of affordable low-income development, multi-family, and single-family–need to stay united to be effective in seeing that tax policy continues to support all housing options for working Americans.
Expanding the universe of people served by housing’s profit-making businesses is core to what we’ll be taking on at Hive, Dec. 6 and 7, in Los Angeles.
Now’s the time to make your voice, your agenda, your ideas heard at a moment of truth in national policy strategy toward housing. Register for Hive here now.
