For years the mortgage interest deduction (MID) was considered an untouchable third rail program. Powerful opponents with deep pockets created a sturdy mythology around the program’s importance: it was created to help people realize the American dream of homeownership (it wasn’t); it incentivizes homeownership (it doesn’t); it is targeted to those who need it (it isn’t); it is a reasonable use of $75 billion in federal resources annually (it’s not).
When NLIHC Founder Cushing Dolbeare first called for the MID’s reform over 40 years ago, she was told such reform would never happen – “it’s impossible.” In our last comprehensive tax reform law over thirty years ago, that was true. Cushing, it turned out, was way ahead of her time; the tax reform law increased the MID benefit.
Since then, the same refrain has been echoed to all who urged reform. It’s impossible: the opponents are too powerful, their endorsements and contributions to policymakers too effective, the belief among low and middle income homeowners that they benefit from the MID, even when they don’t, too cemented. But proponents of MID reform persisted. Little by little, leaders like Sheila Crowley, Ron Terwilliger, Mark Calabria, Stan Humphries, Matt Desmond, and numerous economists and tax policy experts from across the political spectrum have chipped away at the mythology and revealed the MID for what it is: an expensive, inefficient, and poorly targeted tax expenditure.
These individuals’ efforts to expose the MID’s flaws are working. Today, with the possibility of comprehensive tax reform higher than it has been in several decades, key Republicans in the Administration, in Congressional leadership, and on the tax-writing House Ways and Means Committee are actively considering a number of direct and indirect changes to the MID.
Still, that stubborn refrain of “impossible” continues, now shifted to the impossibility of retaining the savings achieved through MID reform to make housing affordable to the lowest income people. Certainly, if we convince ourselves of that refrain, we can easily create a self-fulfilling prophecy and very unfortunately be right.
It’s true that some Republicans are pursuing changes to the MID both out of a recognition of the deduction’s policy flaws and, as importantly in their view, to utilize the savings to pay for lowered individual and corporate tax rates. But with the housing crisis having reached new heights, and with the poorest families suffering its harshest impacts, we cannot allow these housing dollars to be used to benefit corporations. Housing dollars must stay in housing programs and be directed to solutions that assist the lowest income people with the greatest need.
We’ve relaunched the United for Homes campaign with a new website, new materials and new messaging, all designed to seize this moment to redirect tens of billions of dollars towards ending homelessness and housing poverty in America once and for all. Our proposal: 1) Lower the cap on the amount of mortgage on which you can claim tax relief from $1 million to $500,000, impacting fewer than 6% of mortgage holders nationwide, mostly in New York and California; and 2) change the deduction to a credit, providing a new tax break to 15 million lower income homeowners and a deeper tax cut to another 10 million homeowners.
These two changes together would save $241 billion over ten years, to be reinvested into affordable rental housing solutions like the national Housing Trust Fund, a renters’ tax credit, or other rental assistance programs for the lowest income people.
This is a reasonable, bipartisan solution. Conservatives who want to see a simpler tax code can support reforms that do just that, while putting more money back in the hands of their red-state constituents: about half of all spending through the mortgage interest deduction benefits a small number of high-income households in blue states. Progressives who are committed to addressing growing income inequality and racial inequities can support reforms that make the mortgage interest deduction fairer for more families. And policy makers from both sides of the aisle can agree that scarce federal resources should be targeted towards those with the greatest need: people experiencing homelessness, struggling low income renters, and low income homeowners.
Most days at least one person tells me this is impossible. I remind them of what the great Nelson Mandela said: “It always seems impossible, until it’s done.” There is no doubt we still have a steep hill to climb to achieve our goal. But many of you spend your days working to end homelessness and housing poverty, to reverse decades of residential segregation, and to revitalize deeply distressed communities – it’s not like challenging goals have deterred us before!
Join us, and let’s get it done! www.unitedforhomes.org