The United for Homes proposal would expand and better target the MID to maximize its impact.
1) Reduce the size of a mortgage eligible for the MID from $1 million to the first $500,000 (impacting less than 6% of homeowners);
2) Convert the MID deduction into a nonrefundable 15% credit; and
3) Reinvest 100% of the savings from MID reform in affordable rental housing for the lowest-income families.
The proposal calls for reducing the size of a mortgage eligible for the MID to the first $500,000 would significantly reduce costs, while impacting very few homeowners. Only 6 percent of mortgages are over $500,000 (2013-2015 HMDA data); the other households would still receive tax relief for the first $500,000 of their mortgage. The current MID tax break is based on a deduction.
As a result, millions of low and moderate income homeowners who do not itemize their deductions receive zero tax benefits from homeownership. And, because the value of the deduction is based on a household’s tax rate, the MID provides more than twice as much support to households in the highest tax bracket than to lower-income families with the same size mortgage.
Converting MID from a deduction to a credit would ensure that all homebuyers, including first-time and low and moderate income homeowners who most need the assistance to purchase a home, are receiving the benefit without increasing the cost to taxpayers.
These reforms would provide a tax break to an additional 15 million low and moderate income homeowners who currently do not claim the MID, while generating $241 billion in savings over 10 years to be reinvested in affordable rental housing programs for the lowest-income families.
While federal investments in affordable rental housing have a proven track record of reducing homelessness and housing poverty, these solutions are sorely underfunded. As a result, just 1 in 4 poor families that are eligible for rental housing assistance get the help they need.
Meanwhile, half of all homeowners receive no tax benefit from MID, and almost all of those who do have incomes over $100,000. For our nation to fully address the affordable housing crisis for families with extremely low incomes, we must rebalance scarce resources to increase investment in proven solutions.
For more information on the United For Homes Campaign, visit http://unitedforhomes.org
"With the political will to rebalance federal housing policy, we can end the housing crisis with no additional spending." -Diane Yentel, NLIHC president and CEO