Housing Subsidies: An Unfair Playing Field

The mortgage interest deduction plays an important role in helping many American families purchase a home. Fiercely protected by upper and middle class home-buyers, the deduction has helped make home ownership more affordable for many households, but the mortgage deduction disproportionately helps higher income families.

Families with incomes in the highest 20 percent of taxpayers (with family incomes of more than $129,219) receive, on average, 13 times more in tax savings thanks to the home mortgage interest deduction than do families in the middle of the income distribution (with incomes of $45,475 -$76, 234).

If the mortgage interest deduction was eliminated, the wealthiest fifth of families would have to absorb 71 percent of the tax increases that would ensue. Almost no one with an income of less than $40,000 enjoys the benefits of the credit. Instead, the bulk of the benefit goes to the wealthiest Americans—those least likely to need help playing off a mortgage.

Source: Center on Budget and Policy Priorities

The federal government will lose $71.7 billion of potential income by allowing homeowners to deduct part of their mortgage interest in 2014, alone. At the same time, the federal government spent $46.7 billion on housing assistance in 2013. But thanks to cuts mandated by the Budget Control Act, federal investments in low-income housing have fallen by more than 25 percent (after adjusting for inflation) since 2010. Last year, 2.2 million American families benefitted from Housing Choice vouchers, the nation’s largest low-income rental assistance program. Even with vouchers, only 29 affordable and available units of housing are available for every 100 extremely low-income (ELI) renters.

The $71.4 billion in tax expenditures the federal government currently loses on the mortgage interest deduction could be used to help stop the loss of 10,000-15,000 units of public housing every year, due to $25.6 billion in underfunding and unmet capital needs. The remaining $45.8 billion could be reinvested to subsidize more affordable rental housing or to help the 8.7 million homeowners with incomes under $40,000 a year, who have severe housing cost burdens.

Direct spending and tax expenditures (exemptions) are often discussed as if they are completely different.  In fact, as the graph shows, they can be two sides of the same coin.  Allowing increasingly scarce public housing structures for low-income Americans to crumble from neglect, while providing tax exemptions on mortgages for the wealthy, is a particularly egregious example of the inequities of our current housing policies.

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I came across this article on your site after listening to an NPR segment, but was quickly disappointed by what I perceive as a bias article (Unfair playing field). To look at this in a more balanced light, it would beneficial if it was pointed out that the federal government actually shares the burden of this situation, as recent policies and actions taken, enabled many Americans to qualify for mortgages that until recently would not been able to qualify for. I am all for our federal government helping it citizens, but more times than not, through actions (legislation or regulations) our government takes without careful planning and assessment, the citizens of this country end up with a bigger issue than the original problem. The second (and larger) issue I take is the writer cited potential income. The government cannot and should never be able to perceive the peoples' tax payments as income. I think it is bad enough that we fail to listen to most economists that will cite the dynamic that regulations and taxation have as it relates to "revenue" the government receives from it's citizens. Despite systematic abuse & treatment, our free market system (evil capatilism), will provide our government much more in tax revenue when less adhoc "fixes" are applied by our representatives. While both sides of the aisles systemically will paint history to their liking, never side can truthful tell the people they represent, that their is efficient analysis of the potential impacts that their actions will have on America and it's citizens. Finally, I want to ensure that I clarify my appreciation for your organization's efforts, and subsequent effect on our government. I believe that all Americans would benefit to learn about your efforts. In serving this country, I have had the privilege of traveling to many countries throughout the world. While many of these trips were in places that many would want to harm Americans, I take great pride in my efforts to help those people that wanted peace and freedom for their families. Aside from feeling great honor in serving our country, I truly feel that I should kiss the ground every day, that for some reason, I was born in our country. Thank you for the opportunity to respond, and I look forward to learning about your efforts, and will remain hopeful that a more balanced approach will bring more Americans to this great cause that is so fundamental for the continued success of the greatest nation the world has ever known. There will always be great challenges will need to face, and regretful actions our leaders may have pursued, but always remember the greatness that our country, through it's citizens, and provided the rest of the world. No other country comes close in comparison, and that's not bad for a band of outcasts, unwanted, slaves and servants..our common thread is we are all different. The tragic events of 9/11 and the great suffering that many of our fellow Americans will never recover, allowed our nation's citizens to become united and incredibly close. I still remember that wonderful pride, and hope that we never forget that our common bonds remain. In America, the paths are not all equal for everyone yet, but as we continue to make great strides in that great cause, millions of people from nearly every nation await the opportunity, to come and become a citizen of our country, as the opportunities for life, liberty, and the pursuit of happiness is unmatched across the globe. Respectfully, Blessed to be an American
Sure, let's take away the only real tax break I get- mortgage interest deduction. My HHI is low for the NYC metro area and I pay taxes that go for Medicaid, schools, Food Stamps, police, fire, etc while others pay nothing. If you took away this tax break, I would potentially lose my home.