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Mortgage
Deduction
Possibility
Causes
Uncertainty
Industry honchos have been weighing
the potential impact on the housing
market since Trump declared tax
reform a key part of his platform.
I
n December 2016, then incoming
Treasury Secretary Steve Mnuchin
pronounced that the Trump admin-
istration's No. 1 priority would be tax
reform—boldly stating it would be the "largest
tax change since Reagan." However, with that
change could come significant adjustments to
the mortgage interest deduction, something
that stirs mixed emotions across the country.
In a working paper series, the National
Bureau of Economic Research (NBER) found
that the mortgage deduction had no effect on
homeownership—even in the long run—but
rather had sizable impact on housing demand,
causing buyers to purchase larger and more
expensive homes. The largest effect was
on household financial decisions, including
increased debt.
In an interview with CNBC, Doug
Yearley, CEO of Toll Brothers, a Fortune
500 homebuilder, said the change would
discourage homeownership as a whole and,
while talk in Washington, D.C., has been
about modifying the deduction for the last 10
years, he doesn't see it gaining any traction.
However, Ten-X EVP Rick Sharga told
MReport that he believes the change could
happen—likely only to the $1 million cap.
"Based on what we've heard so far from
the Trump administration and Capitol Hill,
it seems likely that the mortgage interest
tax deduction will stay intact; but proposed
tax reforms which raise the personal tax
deduction to $25,000 for joint filers may
discourage taxpayers from itemizing their
taxes and taking advantage of the mortgage
deduction," Sharga said.
This could actually have a greater impact
on the housing market than modifying the
mortgage deduction by lowering the cap.
"Consumers who are weighing the pros
and cons of homeownership will no longer
have the financial incentive to buy a home,"
Sharga said.
