“What’s to be done? Given budget pressures, it may not be realistic to expect the government to spend any more money on housing than it already does. Thus, the focus now should be on reallocating what is already committed, says Mr. J. Ronald Terwilliger, a Republican, who this month will formally launch a foundation designed to start these conversations. His goal is legislation after the 2016 election that realigns housing policy with the shifting dynamics.”
“Right now, the U.S. commits about $200 billion annually to housing, largely through tax breaks. Nearly three-quarters of that goes toward homeownership, and the biggest piece—almost $100 billion annually—is the mortgage-interest deduction.”
Advancing legislation to fund the NHTF with savings gained from reform of the Mortgage Interest Deduction (MID)
Advocating for reform that lowers the cap to $500,000 and converts the deduction to a credit and
Supporting other tax reform proposals that would fund NHTF at a goal of $30 billion a year for 10 years.
NLIHC also prioritizes influencing all proposals to change MID or other homeowner tax subsidies to assure that maximum savings are directed to housing purposes that benefit extremely lo- income (ELI) households.
“According to the Congressional Budget Office, the wealthiest 20% of households, those earning more than $160,000 annually, receive 75% of the total tax benefit. Many homeowners don’t directly benefit from the deduction because they don’t itemize their taxes.”
“Given the failures of housing policy over the past two decades, Mr. Terwilliger says the U.S. must rethink providing the most generous federal housing assistance to the well-housed and the well-to-do. Instead, the government should refocus the existing subsidies on helping young families save to purchase a home, he says.
Curbing the interest deduction could also free up funds for the rental side, where the government can spur more construction of affordable housing by boosting the use of low-income housing tax credits that entice developers to build or renovate more of those units.”
“Politically, none of this will be easy. Some will say it’s a zero-sum game—helping renters at the expense of owners. “
“Not so, says Mr. Terwilliger. If renters can’t ever become homeowners, who will buy those homes when today’s homeowners need to sell?”