Mortgage Interest Deduction

House tax reform proposal a mixed bag on urban development issues

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House Ways and Means Committee Chairman Dave Camp (R-MI) took the first step toward comprehensive tax reform yesterday and introduced a proposal that would have a mixed impact on communities’ efforts to grow in smart, economically efficient ways. Geoff Anderson, President and CEO of Smart Growth America, and Chris Leinberger, President of LOCUS, issued this joint statement in response:

“Above all, we’re glad Congress is finally tackling comprehensive tax reform. Hundreds of billions are currently spent through the tax code on housing and community development and much of this could be spent better than it is today. For anyone who wants to see these incentives achieve their maximum effect—helping Americans access good affordable housing choices in safe, stable, thriving communities, tax reform is a must.

LOCUS

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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