Financial System

Is the Mortgage Interest Deduction Vulnerable?

Shelterforce and the National Housing Institute have been outspoken about the need to change the mortgage interest deduction — the country’s largest housing subsidy, which accrues primarily to wealthy households […]

Shelterforce and the National Housing Institute have been outspoken about the need to change the mortgage interest deduction — the country’s largest housing subsidy, which accrues primarily to wealthy households — for decades. But because it reaches so many people and has become so entrenched, it has widely been seen as a third rail — untouchable.

That spirit was evident when Sen. Jeff Merkley, in proposing a housing tax credit this week at the New America Foundation and here at NCRC to support entrance into homeownership, emphasized that it would be in addition to the mortgage interest deduction, which he called a good tool for wealth building once people have achieved homeownership.

But at this morning’s interactive panel on the future of mortgage finance at NCRC’s annual conference, it was a different story.

Mark Calabria of the Cato Institute (politics does make strange bedfellows), started off with an attack on the deduction, saying it distorted prices and didn’t achieve the policy objective it was ostensibly designed for—supporting homeownership. Mark Zandi of Moody’s followed up later, saying he thought it was not helpful, and that its popularity was going to wane as budget troubles increased and the housing industry realized it didn’t help them.

A clearly surprised Jared Bernstein asked Zandi, “If you could wave a wand and get rid of it, would you?”

Zandi said he would make it a tax credit, cut it half, and phase it out over 10 year period, which would give prices time to adjust slowly.

Perhaps its time for adovcates and progressives to get back on the mortgage interest deduction reform train. We might have back up this time.

Related Articles

  • Stock image of mobile phone lying on a corkboard with screen reading "Money Transfer" and fields for amount and account number (not filled in). A pair of white earbuds is connected to the phone and also lying on the cork.

    Colorado Wants to Give Tenants Money for Paying Rent

    June 20, 2024

    A new statewide program aims to help renters benefit from the value they add to the buildings they live in. Here’s how the program could work, and when it could begin.

  • Two parallel rows of massive columns, as of a courthouse or other official building, seen from one end. Perspective makes them appear to almost meet in the far distance.

    Are Race-Based Lawsuits Affecting Community Lenders?

    June 12, 2024

    Shelterforce spoke with community-lending leaders and experts about the current mood across the sector. What, if anything, are organizations planning to do to avoid becoming the next target?

  • A white man with light brown hair and beard in suit and tie stands at a lectern in front of a bright backdrop in shades of pink and lavender. The words "Just Economy" are printed in light blue as part of the abstract design. The visible part of the sign on the lectern front says "NCRC/National/Community."

    KeyBank and NCRC Are Back Together. What’s Different This Time?

    May 30, 2024

    The nonprofit is giving the big bank a shot at proving it’s not the “worst” for Black borrowers. But after getting burned by the lender during the last community benefits agreement, what guardrails can NCRC put in place to ensure KeyBank keeps its promises?