After President Donald Trump announced his new tax plan, some experts from the mortgage industry responded that the mortgage interest tax deduction is at risk.
One reasons for this sentiment is the following statement: “People don’t buy homes because of the mortgage deduction,” Trump’s Chief Economic Advisor Gary Cohn said.
The National Association of Realtors has been especially vocal in its fight for the mortgage interest deduction.
“This proposal recommends a backdoor elimination of the mortgage interest deduction for all but the top 5% who would still itemize their deductions,” NAR president William Brown said. “When combined with the elimination of the state and local tax deduction, these efforts represent a tax increase on millions of middle-class homeowners.”
Previously, Mnuchin reiterated that the mortgage interest tax deduction will stay put during the Trump administration. But just because the administration isn’t getting rid of the mortgage deduction, it doesn’t mean it can’t be changed.
NAR and other experts fear that by raising the standard deduction, less people will itemize, and the mortgage interest deduction will have less value. This could, in turn, discourage homeownership, according to these experts.
“I think people buy homes because it represents security and a way to build wealth and a sense of stability,” said Laurie Goodman, Urban Institute co-director of the housing finance policy center. “I don’t think the mortgage interest deduction plays a large role in that decision.”
Dan Gilbert, Quicken Loans founder and chairman also agreed with Cohn, saying people buy homes because they are excited about the economy, not because of the mortgage interest deduction.
In fact, one expert says that while she would prefer to revise it, if she had to choose between keeping the deduction or getting rid of it, she would rid of the mortgage interest rate deduction.
“The mortgage interest rate deduction is not increasing the pipeline of working and middle-class homeowners,” Redfin Chief Economist Nela Richardson said in an interview with HousingWire. “It is a subsidy incentive that is given to people who itemize, and itemizes tend to be for high-income earners.”
A study the company expects to release latest this week shows households making over $100,000 receive 77% of the benefit from the mortgage interest deduction, while those making over $200,000 receive one third of the benefit.
“If we are at a point where we have to choose what to fund and what not to fund, and what to subsidize and what not, I think our dollar could be better placed helping middle-class families,” Richardson said, pointing out that since 2012, the share of affordable homes available to medium income earners dropped 12 percentage points to 32%. “From a social perspective, I think the money could be used to really help bridge the equity gap in this country.”
Richardson pointed out the time has come to revise the mortgage interest rate deduction.
“An honest assessment of the mortgage interest rate deduction has to deal with the realities of the current market, not the market that was in place four years ago, 10 years ago, but where we are now,” she said. “I think that honest assessment shows we should rethink it.”
President Donald Trump and what is being referred to…