MID

Smart Growth Implications of the CBO Deficit Reduction Report

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The Congressional Budget Office (CBO), the nonpartisan federal agency that provides economic data to Congress, recently released a new report, “Options for Reducing the Deficit: 2014 to 2023”. The report presents over 100 options for reducing the federal deficit through spending changes and increasing revenue, some of which impact smart growth programs.

A few recommendations made by the CBO are relevant to recommendations that Smart Growth America made in its report, Federal Involvement Real Estate: A Call for Action, which evaluates options for saving the federal government billions of dollars per year by updating certain federal real estate programs to achieve better outcomes for households, communities and taxpayers.

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A call for examination of federal real estate programs

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The following post originally appeared on the National Low Income Housing Coalition blog.

The home mortgage interest deduction turns 100 years old this year. Is it still doing the most it can for American families and taxpayers?

Smart Growth America recently examined the federal government’s involvement in the real estate market and its impact on homeowners, renters and communities across the country. The new report, Federal Involvement in Real Estate: A call for examination, surveys 50 federal real estate programs to better understand where this money goes and how it influences development in the United States. The spending examined in the report’s analysis includes tax expenditures, loan guarantees, and low-interest loans and grants – totaling $2.23 billion in federal spending over the five year study period.

This involvement has an enormous impact on the U.S. real estate market, and even a cursory analysis reveals this impact is uneven. Outdated programs and lack of coordination across agencies contribute to this imbalance, the report explains. As a result, many federal programs are not targeted to those most in need, are not targeted to strengthen existing communities and are not targeted to create more places with economic opportunities.

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The home Mortgage Interest Deduction – who benefits the most?

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Figure 2 from Federal Involvement in Real Estate.

The federal government spends billions each year in the real estate market through a web of costly programs with an uneven impact on homeowners, renters and communities. Smart Growth America’s recent report Federal Involvement in Real Estate surveyed 50 federal real estate programs to better understand where this money goes, who is benefiting (and who isn’t) and which programs are particularly in need of a closer look.

One of the costliest tax-expenditure programs for housing is the home Mortgage Interest Deduction (MID). Created in 1913, the federal government commits an average of $80 billion each year to this program intended to promote homeownership. Our recent report explains that while the MID does promote increased spending on housing , it does not necessarily increase rates of homeownership. Compounding this problem, the deduction in its current form may be skewing the real estate market in unintended ways.

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