NLIHC and other organizations have sent a letter to President Obama supporting the National Commission on Fiscal Responsibility and Reform’s proposal to reform the mortgage interest deduction, but also asked for the savings generated to be directed to low income housing programs. The American Association of Homes and Services for the Aging, Corporation for Enterprise Development, National Center for Healthy Housing, and National Housing Trust joined NLIHC as co-signers.
The commission issued its final report, The Moment of Truth, on December 1, 2010 (see Memo, 12/3/10). It targeted homeowner tax subsidies for high income households, including the mortgage interest deduction, as one way to reduce federal spending. Specifically, it proposed replacing the deduction with a 12% non-refundable credit for all taxpayers, capping at $500,000 the amount of mortgage that can be used for the credit, and eliminating deductions for second homes.
The organizations expressed concern that federal housing subsidies are “unfairly skewed to benefit more well-off people” and said the President must ensure that federal expenditures serve the most economically vulnerable, low and moderate income households. NLIHC and the other groups recommend restructuring the subsidy to a mortgage interest tax credit, lowering the amount of eligible interest and redirecting assistance to low income homeowners and renters.
“According to OMB, homeownership subsidies through tax expenditures total nearly $200 billion for 2011, comprising 20% of all tax expenditures,” the signers wrote. “They cost the federal Treasury nearly five times the annual HUD budget.”
The letter details ways to support low income renters with these redirected funds. “Specifically, we ask that $15 billion a year be transferred to the National Housing Trust Fund and $15 billion a year be used to increase the number of housing choice vouchers from 2 million to 4 million,” the groups wrote. “Using the savings in this manner will not only end homelessness in the United States, but will improve the social and economic well-being of millions of seniors, people with disabilities, and people in the low wage work force by assuring them decent and affordable homes.”