Men, they're coming for the mortgage interest deduction! This means war!
NAR has finally gone to the mattresses over Federal policy. Some time ago, I wrote that the mortgage interest deduction may be phased out or limited as part of Obama Administration’s new “sustainable housing” policy. At the time, I’ve heard quite a few people say, “It’ll never happen”. The thought was that the public loves the MID so much, they feel entitled to it, just like Social Security and Medicare. Plus, NAR is such a powerful political operation that no politician would ever dare touch the MID.
Well, the White House Deficit Commission unveiled its recommendation today, and guess what? The MID is most definitely on the table for outright elimination or significant limitation. From Housingwire:
Of the many proposals inside the document, the most contested one for the housing industry will be the mortgage-interest tax deduction. The commission proposes for the deduction to be limited to principal residences only and that eligible mortgages be capped at $500,000 instead of the $1 million current cap. The commission also proposed a 12% nonrefundable mortgage-interest tax credit for all taxpayers.
As expected, NAR criticized that part of the report, suggesting that eliminating or limiting the MID would cripple the housing market, drag values down another 15% or so, and so on. Investors who have been coming back into the market, at least for foreclosures and short sales, might need to redo all of their financial models based on the tax subsidy for mortgage interest not being there anymore. Buyers will need to redo their rent-vs-buy calculations. All sorts of bad things for housing, at least in the short-term, will come about.
Then earlier today, I see that NAR has put out a Call to Action to its members to call their Congresscritters to defend the MID. This is merely the opening battle, so how this issue gets resolved should signal how the rest of the Housing War of 2010-2012 will go.