NLIHC and IERE Release Report on Racial Inequity of Mortgage Interest Deduction

NLIHC and the Institute for Economic and Racial Equity (IERE) at Brandeis University released new report, Misdirected Housing Supports: Why the Mortgage Interest Deduction Unjustly Subsidizes High-Income Households and Expands Racial Disparities. The report examines who is likeliest to benefit from the $25 billion annual tax expenditure on the mortgage interest deduction (MID) and finds that most benefits flow to higher-income, disproportionately white homeowners. The authors outline how resources dedicated to the MID could instead be used to support low-income renters and homeowners, through expanding rental assistance, investing in affordable rental housing production, supporting small-dollar mortgage lending, and creating stabilization programs to keep low-income families stably housed.

The report explains why 90% of benefits of the MID go to taxpayers with annual incomes greater than $100,000. Since the 2017 tax law went into effect, most modest- and low-income households take the standard tax deduction rather than itemizing their deductions and, therefore, do not claim the MID. The report also examines the racial and ethnic disparities in who benefits from the MID. Because white households are more likely than Black and Latino households to be homeowners with mortgages, they are more likely to take the deduction. White households comprise 66% of the U.S. population but received 71% of the estimated MID benefit in 2018.

Eliminating the mortgage interest deduction and redirecting those resources to households in greater need would serve the cause of racial and housing justice. The report outlines measures that could be taken to support the lowest-income renters, who are disproportionately people of color, to create more opportunities for homeownership for low-income households and households of color, and to keep struggling families stably housed during financial crises.

Read the report at: