The Official Online Newspaper of NAHB
Detractors of the mortgage interest tax deduction popping up frequently in recent weeks on the op-ed pages of newspapers around the nation have been receiving a swift and sharp response from NAHB Chairman Bob Nielsen.
At every opportunity, Nielsen has also been alerting newspaper readers to the need for restoring the housing market to full health in order to create jobs and revive today’s disappointingly anemic economic growth.
In an opinion piece appearing in the Aug. 16 New York Times — “White Picket Fence? Not So Fast” — a group of professors at the New York University Stern School of Business suggested that Americans are in love with the dream of a house and a white picket fence, but they would be better off without the mortgage interest deduction and other support from the U.S. government, including Fannie Mae and Freddie Mac.
In a letter appearing in the paper’s Aug. 29 edition, Nielsen fired back:
“In arguing against tax incentives that promote homeownership, the writers concede that they are not on the same wavelength as owners who ‘see their homes as their share of the American dream, and their best way to save money.’
“Doing away with the mortgage interest deduction would impose a major tax increase on tens of millions of home owners, further depress home values and increase foreclosures. The New York Times itself has called this deduction ‘a prized middle-class benefit,’ and congressional data confirm this: 70% of the benefits go to households making less than $200,000.
“It’s hard to envision how a new policy that weans housing finance from its ‘addiction’ to government support will provide families with the housing opportunities that have benefitted generations of Americans.”
Perpetuating a False Stereotype
On Aug. 4, a Seattle Times editorial — “Limits on Mortgage Interest Deduction Worth Considering” — argued that if Congress cuts back the tax deduction for mortgage interest, “done carefully, this could be a good thing. It could help lower the federal deficit and the growth in the national debt with little hurt to homeownership.”
In his Aug. 8 response, Nielsen noted that the editorial “perpetuates the false stereotype that the deduction primarily benefits millionaires living in McMansions.
“In reality, the biggest beneficiaries are younger households and middle-class home owners. Nearly 70% of the tax benefits go to home owners who earn less than $200,000 annually.
“Suggesting that curtailing the deduction would only affect home owners living in the more expensive urban markets across the land, The Times failed to recognize that its proposal would lower home values, placing even more home owners underwater and exacerbating the foreclosure crisis.
“Further, the mortgage-interest deduction is one of the few elements in the tax code that takes into account differences in local housing prices, and limiting it is an anti-family, anti-middle-class and regressive approach to dealing with our deficit challenges.
“Home building generates a wide range of jobs that extends into areas such as furniture, appliances, architecture and real-estate finance.
“Limiting the mortgage deduction is a double whammy: It would raise home owners’ taxes and keep badly needed jobs for construction workers and other Americans in short supply.”
In a letter published by the Statesman Journal in Salem, Ore., on Aug. 4, Nielsen took to task a columnist for some erroneous reporting in a July 26 article in the newspaper’s pages.
“If Ron Eachus is going to launch an unjustified attack on the mortgage interest deduction, the least he could do is get his facts straight,” Nielsen wrote.
“Eachus claims the deduction primarily benefits the wealthy. That is nonsense. According to the Joint Committee on Taxation, 68% of the benefits of the tax deduction are collected by home owners who make less than $200,000 annually.
“Limiting the deduction in exchange for lower marginal tax rates would be a raw deal for the nation’s 75 million home owners. Who’s to say what lower individual tax rates would be or how long they would last? The last time Congress lowered marginal tax rates was in 1986; by 1994 they had climbed to 30.6%.”
Restoring Credit to Build Homes
In a change of pace, a letter from Nielsen in the July 29 Chicago Tribune contained praise for a column in that paper two days earlier on what the National Association of Realtors® was urging the Administration to do to stabilize the housing market.
“But let’s not forget about the huge toll that the credit crunch is having on the nation’s home builders and its grave repercussions for job growth and the overall economy,” Nielsen wrote.
“Ending the housing production credit crisis is imperative to allow builders to construct new homes. Home builders cannot keep their doors open and create jobs in their communities if they cannot get credit to build even pre-sold homes. And when lenders call in performing loans, everyone suffers. Workers get laid off, sound projects go uncompleted and banks take possession of unfinished property.
“With inventories of new homes nearly depleted in many markets, builders should be gearing up to meet demand, create new jobs and keep the economic expansion moving forward. The only thing holding builders back in these locations are traditional lenders, who still aren’t providing the credit needed to renew the production process.
“NAHB is urging Congress to support legislation (H.R. 1755) recently introduced by Reps. Gary Miller (R-Calif.) and Brad Miller (D-Calif.) that offers a legislative solution aimed at ending the freeze in housing production credit that has forced countless building firms across the nation to shutter their doors.
“Further, the appraisal process has gone seriously wrong became some appraisers are using distressed properties — many of which have been neglected and are in poor physical condition — as comparables in assessing the value of brand new homes without accounting for major differences in condition and quality. This is not only unfair and unreasonable, but it perpetuates the cycle of declining home values, drives more home owners underwater, negatively affects housing demand and acts as an obstacle to the recovery of the housing market.
“Restoring credit availability for new home building activity and resolving ongoing appraisal problems will stabilize home values, stimulate job growth and strengthen the economic recovery.”