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Housing industry pans Trump tax plan

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Doubling the standard deduction would reduce the value of the mortgage interest deduction, groups say. (AP Photo/Andrew Harnik)

Housing industry groups did not delay Wednesday in criticizing President Trump's tax reform outline, warning that by eliminating certain housing deductions and credits, the plan would crimp construction and sales.

The immediate resistance from the politically powerful housing sector is an indication of how hard it will be for Trump to shepherd legislation through Congress. Although he drew praise from retailers and other groups Wednesday for leaving out the contentious import tax or border-adjusted tax from his proposal, Trump ran into opposition elsewhere.

While homebuilders, real estate agents and others in the housing sector favor lower tax rates, they also stand to lose out disproportionately from the elimination of credits and deductions.

Specifically, the industry would face a tax hike if, as Trump proposed Wednesday, the standard deduction were doubled. That would lead millions of families to claim the standard deduction rather than itemized deductions, reducing the value of the mortgage interest deduction.

Further, getting rid of the deduction for state and local taxes could cut into home values, especially in expensive states.

In a statement, the National Association of Realtors called Trump's blueprint a "non-starter."

Housing incentives "are at risk in the tax plan released today," said William Brown, the group's president. "Current homeowners could very well see their home's value plummet and their equity evaporate if tax reform nullifies or eliminates the tax incentives they depend upon, while prospective homebuyers will see that dream pushed further out of reach."

The National Association of Homebuilders also criticized Trump's doubling of the standard deduction, with Chairman Granger MacDonald saying that it would "severely marginalize" the mortgage interest deduction.

Another worry for the group is that tax reform could crimp the low-income housing tax credit.

Speaking with the Washington Examiner, the group's CEO, Jerry Howard, said his organization was scheduled to meet Friday with officials at the White House to lay out the case for maintaining the value of the mortgage interest deduction and other breaks, as well as low tax rates for small businesses.

Housing groups have expressed similar concerns about the House Republican tax reform blueprint, which also would eliminate many breaks and potentially alter the mortgage interest deduction directly.

Howard said that the discussions with lawmakers are policy conversations currently but will become political and "potentially a little more contentious" as legislation is developed.

"This is going to be a significant undertaking, and we are prepared to use whatever resources we have at our disposal to ensure a satisfactory outcome," he said.