It's gateway to ownership for middle-income families

As Congress works to advance tax reform, lawmakers should think twice before taking action to undermine the nation’s existing and longstanding support for homeownership by eliminating or diminishing the effectiveness of the mortgage-interest deduction.

Going down this path would harm the interests of tens of millions of homeowners and those who aspire to own a home. It would also result in severe economic repercussions by reducing the value of the largest asset held by most American families. According to the latest Federal Reserve data, household ownership in real estate currently stands at $23.1 trillion. It only takes a 5 percent drop in home values to wipe out $1 trillion in household wealth. The housing sector is still recovering from the devastation brought about when home values plummeted less than a decade ago and the economy teetered on the edge of a second Depression.

The fact is that the home deduction is targeted to the middle class. On average, 70 percent of homeowners with a mortgage claim this deduction, and 90 percent of all mortgage interest paid gets deducted. The deduction benefits younger families who pay primarily interest in the early years of a mortgage and use this benefit to help meet their monthly payments.

The mortgage-interest deduction has been enshrined in our nation’s tax code for more than a century because policymakers on both sides of the political aisle understand that homeownership is a cherished ideal and a gateway to the middle class.

So let’s be clear: For most owning households, the homes are their primary source of wealth and financial security. Tax policy that would marginalize the mortgage-interest deduction — such as doubling the standard deduction and encouraging many working families to forgo itemizing — would harm home values, act as a tax on existing homeowners and force many younger, aspiring home buyers out of high-cost markets.

Therefore, as Congress moves to overhaul the tax code, it must act to protect homeowners to foster economic growth.

In addition to ensuring that homeowners continue to receive tax deductions from the mortgage-interest deduction and real-estate property taxes, policymakers should also retain the deduction for second homes. Each year, millions of households have taken advantage of this provision without realizing it. When homeowners sell one home to purchase another, they effectively own two residences in a single year. Furthermore, government data indicate that among homeowners who have a mortgage on a second home, the average household income is only $71,344.

Homeownership incentives in the current tax code — specifically the deductions for mortgage interest and state and local property taxes as well as provisions that encourage development of affordable housing, have helped the U.S. create the best-housed nation on Earth. As the tax reform debate kicks into high gear, Congress must acknowledge this reality and ensure that housing remains a national priority. As Congress moves to overhaul the tax code, it must act to protect homeowners to foster economic growth.