The housing industry has lined up all its aces and is preparing to do battle with a deficit cutting Congress that has declared that there are no sacred cows in its search for ways to cut the budget deficit. The first shot across the bow came in November when the President’s Deficit Reduction Commission leaked out an early draft of their report calling for a modification of the Mortgage Interest Deduction (MID).
First to react to this announcement was the National Association of Realtors (NAR), which on November 19, 2010, released a letter to the commission chairs detailing early consumer reactions to proposed changes to the mortgage interest deduction, and their potential to damage home values and the housing market.
In the letter, NAR President Ron Phipps stated, “Some consumers already believe that the MID will not be available to them. Your recommendation has sown the seeds of uncertainty as even current owners fear that they will not be able to claim the MID and that their homes will lose even more value.”
Phipps also said in the letter REALTORS ® would reject any tax law changes, including modifications to MID that would impair Americans’ ability to own their homes and to invest in real estate. “The federal policy choice to support home ownership has been in the Internal Revenue Code since its inception,” he said. “We see no valid reason to undermine that basic decision. Indeed, we believe that the only viable tax system is one that would continue to nurture home ownership.”
On December 1, NAR followed with a statement that the MID must not be targeted for change. The statement also claimed that according to their research, any changes to the MID could critically erode home prices and the value of homes by as much as 15 percent.
“Any further downward pressure on home prices will hamper the economic recovery, raise foreclosures and hurt banks’ abilities to lend and likely tip the economy into another recession resulting in further job losses for the country. It will effectively close the door on the American dream."
On that same day, the Mortgage Bankers Association (MBA) joined the fight by releasing a statement in support of NARs stance:
“A rollback of the mortgage interest deduction as proposed by the commission would have a devastating impact on both present and future homeowners in this country. It would immediately stop in its tracks any stabilization we are seeing in the housing market and would effectively increase the cost of homeownership for millions upon millions of people.”
And now the National Association of Home Builders has joined forces with NAR and the MBA creating a powerful lobby to save the MID.
“There are a couple of sacred cows in the tax code, and the mortgage interest deduction is one of those. Politicians take it on at their own risk,” said J. P. Delmore, the senior federal legislative director for the home builders’ group.
But times have changed since November 2nd and the new Republican House is determined to leave no stone unturned in their push to find ways to trim down the federal deficit.
Delmore believes some sort of tax legislation is likely to advance in Congress either this year or next as lawmakers contend with mounting deficits, the presidential commission’s recommendations for reform and the 2012 expiration of tax breaks that Congress merely extended late last year.
Though the commissions proposal didn’t garner enough backing to pass during the lame-duck session and previous efforts over the years have also failed, many believe that a modification of the MID is an idea whose time has finally come. Proposals range from a straight 12 percent deduction to limiting the amount that can be written off to cutting the MID altogether.
Spurred into action, NAHB has set up a website, savemymortgageinterestdeduction.com, and filled it with data and fact sheets on the benefits of such deductions and NAR, meanwhile, has aired ads saying the elimination would hurt hardworking families.
Expect a bloody battle over this one…
Tags: mortgage interest deduction, nar, nahb, deficit reduction commission, housing industry, mba, congress, real estate, home ownership, home prices, economic downturn
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