The American Dream and home ownership have been partners for a long time.
One of the cornerstones of our American housing policy has been the Home Mortgage Deduction, which has been in place since the inception of the tax code in 1913, and allows homeowners to deduct mortgage interest from their taxes. The tax deduction on home mortgage interest lowers the cost of owning a home significantly.
The housing industry and prospective homeowners and sellers are facing many threats to a quick recovery.
- Limited availability of long-term, fixed-rate mortgages
- Minimum down payments of 20% or more
- Higher standards to qualify for a home mortgage
- The number of Homeowners that are still “upsidedown” in their homes
- “Short Sales” and Foreclosures that are prevalent throughout the country
Now, our fragile housing market is threatened with a more far-reaching deterrent. The mortgage interest deduction is being viewed by the Federal Government as an expedient way to reduce the federal deficit. Lawmakers on both sides of the aisle are once again proposing measures to limit or eliminate the deduction. The removal of this deduction would push any housing recovery into free-fall , causing the demand for homes to decrease and housing prices to tumble further.
Recent public opinion polls have indicated that although Americans overwhelmingly oppose eliminating the deduction, lawmakers who are intent on reducing the deficit find this possibility enticing. According to data from the National Association of Realtors, proposals to scale back or eliminate the mortgage deduction would cause home values to fall 15% for all homeowners, not just those with mortgages.
Lawmakers have bailed out the Banks and the car industry, but are now considering ways to cut benefits to average citizens, such as reducing Social Security and Medicare and eliminating one of the few surviving benefits of home ownership.
Do the President and Congress understand the ramifications of tampering with this long-held tax deduction, especially given the present economy and the shaky housing outlook? It seems ill-timed to say the least.
Atlanta Decatur Homes is a local real estate company selling homes in Atlanta, Decatur, and Emory University neighborhoods for over 25 years.