The J. Ronald Terwilliger Foundation for Housing America’s Families has published a report, “How Federal Dollars are Spent: The Case for New Priorities,” calling for reforms to the mortgage interest deduction (MID) and investing in housing assistance for lower income renter households.
The report highlights:
- Together, the three largest federal housing subsidies — the mortgage interest deduction, the deduction for local property taxes, and the exclusion of capital gains on sales of principal residences — have an estimated annual cost of $129 billion.
- Federal rental assistance programs help meet the housing needs of the lowest income Americans, many of whom live below the federal poverty line. However, fewer than one in four households eligible for federal rental assistance actually receives this support.
- With rental demand exploding, housing-cost burdens reaching unacceptable levels, and many lower and middle income Americans unable to access the homeownership market, it is time to recalibrate federal policy to respond to these new realities.
The report reveals the striking imbalance of current federal housing assistance, where most of the benefits accrue to higher income households. It notes that the median income of homeowner households ($68,797) is more than double the median income of renter households ($33,784), but renters receive none of benefits of mortgage-related tax expenditures and most of these expenditures go to higher income homeowners.
The NLIHC-led United for Homes campaign proposes reforms to the MID consistent with the Terwilliger Foundation’s call for a recalibration of federal housing policy. The United for Homes campaign would reduce the amount of a mortgage eligible for a tax break from $1 million to $500,000 and convert the deduction into to a 15% non-refundable tax credit. These changes would provide 25 million homeowners a greater tax break and would generate $241 billion in savings over 10 years to be reinvested into affordable rental solutions for people with the greatest needs.
The Terwilliger Foundation report notes that there is bipartisan support for ensuring that federal housing resources are spent more effectively and for those with the greatest need.