WASHINGTON, D.C. – A Rare Occurrence: The Geography and Race of Mortgages Over $500,000, released today by the National Low Income Housing Coalition (NLIHC), reveals that only 5% of the mortgages obtained in the past three years in the U.S. were larger than $500,000 and that lowering the Mortgage Interest Deduction (MID) cap to $500,000 would have no impact on the majority of homeowners nationwide given the rarity of mortgages over that amount.
The National Low Income Housing Coalitions and other homeless and affordable housing advocates support lowering the portion of a mortgage on which tax relief can be claimed from the current $1 million to $500,000 and investing the savings in affordable housing for the poor. Such a change phased in over five years would generate $95 billion over ten years.
The report analyzed Home Mortgage Disclosure Act (HMDA) data from the past three years (2012, 2013, 2014) in order to understand the prevalence and geographic distribution of mortgages over $500,000.
The key findings from the analysis are:
- Of the nearly 20 million mortgages originated from 2012 to the end of 2014, just 5.0% were larger than $500,000. In 39 states, the percent of mortgages over $500,000 was less than 3%; in 19 states, it was less than 1%.
- Nationwide, only 1.8% black borrowers and 2.4% of Hispanic borrowers obtained mortgages larger than $500,000.
- Mortgages larger than $500,000 were geographically concentrated. The ten states with the greatest number of mortgages larger than $500,000, in order, are California, New York, Virginia, New Jersey, Texas, Massachusetts, Illinois, Maryland, Washington, and Florida. These ten states accounted for 81.0% of the national total. California alone accounted for 45.7% of the national total.
- The District of Columbia (27.3%), Hawaii (24.0%), and California (16.8%) had the highest share of mortgages that were larger than $500,000.
- The share of mortgages larger than $500,000 was greater than 10% in just 48 counties (1.5% of all U.S. counties). These forty-eight counties accounted for 67.4% of the national total of mortgages larger than $500,000. Fourteen of these counties were located in California and accounted for nearly 43.8% of the national total.
“Mortgages over $500,000 are rare, and they are concentrated in a just few areas of the country,” said Dr. Andrew Aurand, NLIHC’s Vice President for Research. “In the past three years, less than 1% of new mortgages have been over $500,000 in the majority of counties. Very few local housing markets are driven by large mortgages over $500,000.”
In 2013, NLIHC launched the United for Homes (UFH) campaign that proposes to modify the current MID in two ways. The first is to reduce the portion of a mortgage eligible for a tax break from $1,000,000 to $500,000. All mortgage holders would still receive tax relief, but it would apply only to the first $500,000 of their mortgages. The second proposed change is to convert the deduction to a 15% non-refundable tax credit, which would provide tax relief to millions of additional lower income homeowners who don’t currently make enough to itemize on their taxes. These two reforms together, if phased in over five years, would generate an estimated $213 billion in new revenue over ten years. The UFH campaign proposes using this revenue to fund the National Housing Trust Fund (NHTF) and other federal housing programs that benefit the lowest income households in America.
“There is no policy rationale for the federal government to continue to subsidize the portion of mortgages that exceed $500,000,” said Sheila Crowley, NLIHC’s President and CEO. “The modest changes proposed under the United for Homes campaign would have little impact on the relatively few homeowners who can afford such mortgages, and the savings would go a long way to ending homelessness and housing poverty in America.”
A Rare Occurrence: The Geography and Race of Mortgages Over $500,000 is available at: http://nlihc.org/research/rare-occurrence
Established in 1974 by Cushing N. Dolbeare, the National Low income Housing Coalition is dedicated solely to achieving socially just public policy that assures people with the lowest income in the United States have affordable and decent homes.
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