The mortgage deduction has been sacrosanct in promoting home ownership since the Presidency of Herbert Hoover. That may be changing as Housing and Urban Development Secretary Shaun Donovan, pictured on the right, floated the trial balloon of eliminating or modifying the home interest deduction.
Eliminating or modifying the home interest deduction.
That should send a chill down the spine of every real estate agent and broker in the country. The industry went insane over the first time homebuyers credit yet barely recognizes that one of the key drivers of home ownership by the government is being threatened.
Discussing the housing crisis with reporters at a session sponsored by Third Way, a center-left think tank, Donovan offered some thoughts about whether housing policy had been too skewed toward promoting home ownership, given the number of foreclosures. A more balanced approach, he said, would also focus on the needs of renters and new ways to help them.
Asked whether the government should consider modifying the mortgage interest deduction, he made two points. He said that home ownership is a good thing but that officials may need to rebalance the incentives for owning compared to renting. He also said the president’s deficit reduction commission will be “looking broadly at a range of options.” This deduction, he added, is “a significant enough expenditure” that it will surely be looked at. via WSJ
Now this is not the policy of the Obama administration. Yet.
But it does follow a trend that the administration uses.
- First, a study magically appears recommending said action from administration friendly economist. Oh, wait, we saw that last week. See Economists Call For Reduction in Mortgage Interest Tax Deduction.
- Next a senior administration official floats a trial balloon on the proposed enactment of a new policy. That is this post.
- The next step will be to find a crisis that this will fix. I am not sure if will be balancing the budget or saving us from ourselves getting foreclosed upon.
Real estate agents and brokers, it would behoove you to follow this issue closely. The pot of gold the government can try to recoup will be nearly 150 billion dollars in 2015.
Think about that, 150 billion dollars out of the real estate industry, plus lower housing values, plus lower commissions and income for those in the industry.
The new home buyers tax credit was a drop in the bucket compared to the damage we will see in the industry if this ever happens.
The real damage will be the change in the philosophy of the country that home ownership will not be considered something that needs to be promoted.