More than 70 percent of Americans believe owning a home is an essential part of the American Dream, but with potential tax reforms on the way that could make homeownership less affordable for many, the National Association of Home Builders says there’s still much work to be done.
If President Trump’s plan for tax reform moves forward, a large percentage of American homeowners would be unable to deduct mortgage interest from their federal income taxes. Though the plan does not outright eliminate the deduction, it does raise the threshold of who can use it—and once on the books, it will mean only homeowners with hefty home loans will qualify. This, according to the NAHB, could create an affordability problem.
“A key component in the ability of families of all income levels to become homeowners is the mortgage interest deduction, which has been a cornerstone of American housing policy since the inception of the tax code more than 100 years ago,” the NAHB reported.
According to data from the Congressional Joint Committee on Taxation, the deduction has primarily benefited middle-class taxpayers thus far.
Though Granger MacDonald, NAHB Chairman, said the organization has “long fought for sensible reforms to burdensome regulations that needlessly increase the cost of homes for low- and middle-income families,” this deduction doesn’t fall into that category—and raising the threshold could put homeownership out of reach for many Americans.
“NAHB supports this tax incentive, as well as provisions that encourage development of affordable housing,” the NAHB stated.
Currently, the national homeownership rate is “stalled” at 64 percent, according to the NAHB. As such, the organization says it “must continue working to address the obstacles for many potential homebuyers”—tax code changes included.
“We must support the dream of homeownership and not create barriers through unnecessary federal regulations or tax code changes,” MacDonald said.
President Trump’s tax code reform isn’t the only change coming down the pipeline for the housing industry. According to the 2018 budget blueprint released in May, the President will also cut $6.2 million from the Department of Housing and Urban Development, end the Community Block Grant Program, and slash the budget of HUD’s rental assistance program.