Lowering MID Cap to to Fund NHTF
NJ Has only 40,140 or 7.6% of all Mortgages
The National Low Income Housing Coalition has released a report, “A Rare Occurrence: The Geography and Race of Mortgages Over $500,000.”
The study finds that only 5% of new mortgages obtained in the past three years were larger than $500,000.
Mortgages of this size are rare in most areas of the country, with most of them concentrated in high cost housing markets. In 40 states, fewer than 3% of new mortgages were larger than $500,000, and in 19 states such mortgages were less than 1% of those obtained in the state.
Current law allows taxpayers with mortgages to deduct the interest on mortgages of up to $1,000,000, plus an additional $100,000 in home equity loans. The United for Homes Campaign, led by NLIHC, has called for lowering the cap to the first $500,000 of a mortgage, converting the deduction to a 15 percent non-refundable tax credit, and directing the savings from these changes to fund the National Housing Trust Fund (NHTF).
A preliminary analysis conducted for NLIHC by the Tax Policy Center shows that the two changes phased in over five years would generate $213 billion over ten years. Lowering the cap alone would produce $95 billion in new revenue over ten years.
NLIHC examined Home Mortgage Disclosure Act (HMDA) data from 2012, 2013, and 2014 to learn where mortgages over $500,000 are obtained and who obtains them.
Five New Jersey Counties – Morris, Essex, Somerset, Union and Hudson Counties – has 2% of the total number of mortgages in the U.S. Only 48 counties – including these five – had more than 10% of their mortgages larger than $500,000. These 48counties, or just 1.5% of the 3,143 counties in the U.S., accounted for 67.4% of all mortgages over $500,000.
Opponents of mortgage interest deduction (MID) reform assert that changes to the tax treatment of home mortgages would lower home values. NLIHC’s new report, however, shows that reducing the portion of a mortgage eligible for tax relief to $500,000 would not have a significant impact, given the rarity of mortgages over that amount, especially if phased-in as the campaign proposes. Lowering the MID Cap to $500,000 would make us United for Homes and fund the NHTF.
Click here to read the full report.
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