In its August 8 editorial, "Lower the cap on the mortgage interest tax deduction," the Washington Examiner argued that smart, modest reforms to the MID – a $70 billion tax write-off that primarily benefits higher income households – should garner bipartisan support.
We agree. The editors, however, miss one key to attracting bipartisan support for MID reform: reinvesting the significant savings into affordable rental homes for people with the greatest needs, through solutions like the national Housing Trust Fund or rental assistance. Using the savings from MID reform to offset the cost of lowering tax rates for millionaires and corporations should be a non-starter.
Any tax reform legislation must keep housing dollars within housing and invest savings from MID reform to addressing the growing rental housing crisis for those most impacted.
According to research from the National Low Income Housing Coalition, every state and community across the nation – rural, suburban, and urban – has a severe shortage of affordable rental homes for people with the lowest incomes. Nationally, there are only 35 rental homes affordable and available for every 100 extremely low income renters. As a result, 71 percent of these households pay more than half of their limited incomes on rent and utilities, leaving them few resources to cover other basic needs, like food, healthcare, or savings for retirement or their children's education.
These households are at a high risk of eviction, which destabilizes families and communities, and in worst cases, results in homelessness. Despite the clear need, however, three out of four of the poorest families eligible for housing assistance are turned away due to a lack of funding.
NLIHC's United for Homes campaign, which has been endorsed by over 2,300 national, state, and local organizations and government officials, calls for reforming the MID and reinvesting the savings into rental housing solutions for those with the greatest needs. Today, 75 percent of the $200 billion Congress spends each year to help Americans buy and rent their homes goes to higher income households through the MID and other homeownership tax benefits. By reprioritizing federal housing policy and targeting resources to where they are needed most, we can help end homelessness and housing poverty once and for all – without adding any costs to the federal government.
This common sense proposal should draw support from Republicans and Democrats alike.
Conservatives often prioritize targeting scarce federal resources to those who need them the most and discourage wasteful and inefficient spending. Moreover, reforming the MID and reinvesting the savings would make the tax code simpler and put more money back in the hands of their constituents, a priority for Republicans. About half of all spending through the MID benefits a small number of high-income households concentrated in a few select geographies. Reinvesting in rental housing solutions would benefit suburban and rural communities that face unique challenges to building and preserving affordable rental housing for their lowest income residents.
Progressives committed to addressing growing income inequality and racial inequities should likewise support reforms that make the MID fairer and that increase resources for those with the greatest needs. As Pulitzer prize-winning author Matthew Desmond notes, the MID is the "engine of American inequality." One important way to address this inequality is to ensure that all families, especially those with the lowest incomes, can benefit from the improved health, educational, employment, and economic outcomes that come from living in a home they can afford.
In addition, the Trump administration's proposal to double the standard tax deduction makes reforming the MID even more important. While doubling the standard deduction could provide a greater tax break to low and moderate income families, it would make the MID even more regressive, benefitting only the highest-income households with the largest mortgages. Any tax plan that doubles the standard deduction must include reforming the MID and reinvesting the savings into affordable rental housing for people with the greatest needs.
Now is the time for leaders from both parties to work together to enact sensible mortgage deduction reform and to target the savings to address the growing rental housing crisis facing America's extremely low income families.
Diane Yentel is president and CEO of the National Low Income Housing Coalition.
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