Housing subsidies for the middle class and the wealthy in the US (SLNYT)
May 9, 2017 7:40 AM Subscribe
Who benefits most from US housing policies? Not the poor! American homeowners who can afford big mortgages get tax breaks that those who can only afford more modest homes, or who cannot afford any home at all, do not get.
Unless I missed something the writer failed to mention the mortgage interest deduction for vacation homes.
I read the article this morning and it is very good. It is one of the major inequities of our system. I think we've been able to take advantage of the benefit exactly once; every other year the amount is too low to help.
posted by Dip Flash at 8:16 AM on May 9, 2017 [1 favorite]
posted by Dip Flash at 8:16 AM on May 9, 2017 [1 favorite]
There seemed to be some buzzing earlier this year about getting rid of the interest deduction for mortgages, and that would be great for non-home owners like myself. Anything to drive prices down.
Of course, that requires a loss for current home owners. Imagine how much I give a shit about that.
posted by Strange_Robinson at 8:20 AM on May 9, 2017 [6 favorites]
Of course, that requires a loss for current home owners. Imagine how much I give a shit about that.
posted by Strange_Robinson at 8:20 AM on May 9, 2017 [6 favorites]
They buzz about that every year, and it never goes anywhere, because as we know once the government starts giving, it can't take away. As a middle-class person who's gradually being starved in a gentrifying neighborhood, I depend on that deduction.
posted by Melismata at 8:26 AM on May 9, 2017 [5 favorites]
posted by Melismata at 8:26 AM on May 9, 2017 [5 favorites]
The lobbying interests that pop up everytime they even think about getting rid of the mortgage interest deduction will kill it everytime.
Everyone knows that the mortgage interest deduction creates massive distortions in the housing market that make owning a single family dwelling optimal in terms of a tax avoidance strategy. Because so many industries are dependent on the model of buy a starter home -> sell a starter home after it appreciates -> move to a new higher value home using your equity -> repeat as desired.
At the end of that you've created a system that desperately needs people buying into the base levels in order to fuel the increase in equity for previous investors.
posted by vuron at 8:59 AM on May 9, 2017 [6 favorites]
Everyone knows that the mortgage interest deduction creates massive distortions in the housing market that make owning a single family dwelling optimal in terms of a tax avoidance strategy. Because so many industries are dependent on the model of buy a starter home -> sell a starter home after it appreciates -> move to a new higher value home using your equity -> repeat as desired.
At the end of that you've created a system that desperately needs people buying into the base levels in order to fuel the increase in equity for previous investors.
posted by vuron at 8:59 AM on May 9, 2017 [6 favorites]
mareli - it was easy to miss but I think this is the only reference in the article: "All homeowners in America may deduct mortgage interest on their first and second homes." it was included in the background/description of what the MID is, but not ever brought up again, say, in the section about getting rid of or modifying the existing MID to swing things back to a more equitable policy.
as the beneficiary of this policy it enrages me - look at the profiles of those families, even the poorest of the homeowners had to come up with something to put down and according to the fed survey on household economics and decision making 46% of American households couldn't manage a $400 medical bill without borrowing money or selling something they own. I just don't understand how we could possibly get from were we are to where we'd need to be.
This just seems like a classic case of the ultra rich (who accrue the vast majority of the benefit) convincing the less rich (who frequently think of themselves as middle class) that a change threatens their status relative to the poor.
The article does a good job of discussing why this issue is generally a political non-starter, but it would seemingly be pretty easy to immediately remove the benefit from second homes and cap the amounts (possibly with a regionally-adjusted cap so that all of the coastal folks with half million dollar homes don't get lumped in with billionaires).
posted by Exceptional_Hubris at 9:02 AM on May 9, 2017 [6 favorites]
as the beneficiary of this policy it enrages me - look at the profiles of those families, even the poorest of the homeowners had to come up with something to put down and according to the fed survey on household economics and decision making 46% of American households couldn't manage a $400 medical bill without borrowing money or selling something they own. I just don't understand how we could possibly get from were we are to where we'd need to be.
This just seems like a classic case of the ultra rich (who accrue the vast majority of the benefit) convincing the less rich (who frequently think of themselves as middle class) that a change threatens their status relative to the poor.
The article does a good job of discussing why this issue is generally a political non-starter, but it would seemingly be pretty easy to immediately remove the benefit from second homes and cap the amounts (possibly with a regionally-adjusted cap so that all of the coastal folks with half million dollar homes don't get lumped in with billionaires).
posted by Exceptional_Hubris at 9:02 AM on May 9, 2017 [6 favorites]
As someone who is newly upper middle class, all the many ways that you get rewarded simply for having money are sort of absurd. 401ks, flexible spending accounts, tax deductions, rewards credit cards, the list goes on and on. It's a nice change from getting dinged with late fees and interest and on and on and on, but it really feels grossly unfair.
Not to mention all the GOP bills that are being shoved through congress that also disproportionately benefit people like me -- who are going to largely be the 'coastal elites' that all his voters hate so much and who didn't vote for him..
posted by empath at 9:07 AM on May 9, 2017 [21 favorites]
Not to mention all the GOP bills that are being shoved through congress that also disproportionately benefit people like me -- who are going to largely be the 'coastal elites' that all his voters hate so much and who didn't vote for him..
posted by empath at 9:07 AM on May 9, 2017 [21 favorites]
Funny. Canada does not allow a mortgage interest deduction and has a higher percentage of home ownership than the U.S.
As with health insurance, Canada once more shows a better way even as U.S. politicians stubbornly insist the problem is impossible to solve.
posted by JackFlash at 9:23 AM on May 9, 2017 [10 favorites]
As with health insurance, Canada once more shows a better way even as U.S. politicians stubbornly insist the problem is impossible to solve.
posted by JackFlash at 9:23 AM on May 9, 2017 [10 favorites]
as the beneficiary of this policy it enrages me
Same. I'd much prefer to pay a little more in tax to live in a more equitable society. But, sadly, that situation is not going to happen in America for a long time, if ever.
posted by tobascodagama at 9:34 AM on May 9, 2017 [3 favorites]
Same. I'd much prefer to pay a little more in tax to live in a more equitable society. But, sadly, that situation is not going to happen in America for a long time, if ever.
posted by tobascodagama at 9:34 AM on May 9, 2017 [3 favorites]
Canada once more shows a better way even as U.S. politicians stubbornly insist the problem is impossible to solve.
Canada simply never implemented such a deduction in the first place. Per Melismata, the deduction is pretty hard to remove and would be political suicide for whomever proposed it. And let's be fair, it would have to be the Democrats as the Republicans aren't going to get rid of a huge tax deduction. It's like buying a pet elephant - your choices are to keep feeding it or to deal with an elephant corpse.
What I never realized it that the deduction applies to two houses! And one can even be in a foreign country! This is actually kind of a big deal for me. I had no idea.
posted by GuyZero at 10:16 AM on May 9, 2017 [2 favorites]
Canada simply never implemented such a deduction in the first place. Per Melismata, the deduction is pretty hard to remove and would be political suicide for whomever proposed it. And let's be fair, it would have to be the Democrats as the Republicans aren't going to get rid of a huge tax deduction. It's like buying a pet elephant - your choices are to keep feeding it or to deal with an elephant corpse.
What I never realized it that the deduction applies to two houses! And one can even be in a foreign country! This is actually kind of a big deal for me. I had no idea.
posted by GuyZero at 10:16 AM on May 9, 2017 [2 favorites]
It is expensive to be poor. This is a truth that I don't think most people who have not experienced this phenomena realize. On the other hand if you have enough money you can live fairly frugally and life is much easier. The no man's land between poor and having enough money has been shrinking for 30 years in America, now it is almost binary.
posted by Pembquist at 10:18 AM on May 9, 2017 [6 favorites]
posted by Pembquist at 10:18 AM on May 9, 2017 [6 favorites]
Somebody want to clue me in on what I'm doing wrong with respect to my taxes?
Even with the mortgage interest deduction, we only come out a few hundred dollars over the standard deduction. If Trump's proposal to increase the standard goes through then that would blow away our itemized deductions.
Totally not seeing a huge subsidy of my mortgage on my tax bill here...
posted by keep_evolving at 10:19 AM on May 9, 2017 [2 favorites]
Even with the mortgage interest deduction, we only come out a few hundred dollars over the standard deduction. If Trump's proposal to increase the standard goes through then that would blow away our itemized deductions.
Totally not seeing a huge subsidy of my mortgage on my tax bill here...
posted by keep_evolving at 10:19 AM on May 9, 2017 [2 favorites]
Totally not seeing a huge subsidy of my mortgage on my tax bill here...
This is why interest-only mortgages were popular for a while. The MID is incentive to leverage even higher and take out more debt.
posted by GuyZero at 10:20 AM on May 9, 2017 [1 favorite]
This is why interest-only mortgages were popular for a while. The MID is incentive to leverage even higher and take out more debt.
posted by GuyZero at 10:20 AM on May 9, 2017 [1 favorite]
Double the standard deduction and phase out mortgage interest deductions over a fifteen year period (second home deductions phase out over five; the first home phase-out starts small and increases every year). You're done and most people who can afford to buy a home or have just done so won't even notice.
posted by thecaddy at 10:32 AM on May 9, 2017 [4 favorites]
posted by thecaddy at 10:32 AM on May 9, 2017 [4 favorites]
keep_evolving have you owned your home for a long time? did you put a lot of money (well in excess of 20%) down? your profile says you live in seattle so im going to assume your home cost you a fair amount, if I didn't have that bit of info I would guess your house didn't cost all that much . . .
the thing about the MID is that it isn't, on a per capita basis, all that much money. Using some very round numbers say I buy a 500k home, put 20% down and finance 400k at 4% for 30 years giving me a 2000/month payment. Around $17k of the 24k in payments id make in the first year are interest. That's already about 5k more than the standard deduction for married filing jointly couples. Even that 17k deduction is only worth a few thousand real dollars at the end of the day, so in effect this policy keeps at most a few hundred bucks a month in my pocket while half the population could not withstand a $400 medical bill without going into debt or selling things they own
for folks mortgaging less expensive homes, or further along in their repayment/amortization schedules, the benefit is much less. For people buying/borrowing for very expensive homes the benefit is enormous.
posted by Exceptional_Hubris at 10:37 AM on May 9, 2017 [7 favorites]
the thing about the MID is that it isn't, on a per capita basis, all that much money. Using some very round numbers say I buy a 500k home, put 20% down and finance 400k at 4% for 30 years giving me a 2000/month payment. Around $17k of the 24k in payments id make in the first year are interest. That's already about 5k more than the standard deduction for married filing jointly couples. Even that 17k deduction is only worth a few thousand real dollars at the end of the day, so in effect this policy keeps at most a few hundred bucks a month in my pocket while half the population could not withstand a $400 medical bill without going into debt or selling things they own
for folks mortgaging less expensive homes, or further along in their repayment/amortization schedules, the benefit is much less. For people buying/borrowing for very expensive homes the benefit is enormous.
posted by Exceptional_Hubris at 10:37 AM on May 9, 2017 [7 favorites]
in effect this policy keeps at most a few hundred bucks a month in my pocket while half the population could not withstand a $400 medical bill without going into debt or selling things they own
This is why, as a homeowner, I would be happy to see the tax code simplified and the money be used for more worthwhile purposes. My experience in getting my first mortgage was that the banker figured out the maximum mortgage I could afford, including the tax breaks, and then steered me toward a house at the top of my price range. People are being sold houses that are much bigger than they actually need.
posted by fraxil at 10:51 AM on May 9, 2017
This is why, as a homeowner, I would be happy to see the tax code simplified and the money be used for more worthwhile purposes. My experience in getting my first mortgage was that the banker figured out the maximum mortgage I could afford, including the tax breaks, and then steered me toward a house at the top of my price range. People are being sold houses that are much bigger than they actually need.
posted by fraxil at 10:51 AM on May 9, 2017
Another way the rich can take more advantage of the mortgage interest deduction: they can bundle certain types of deductions.
So for example if you are right on the cutoff get only a slight advantage taking the standard deduction (ie if it gets your typical itemized deductions are $6500 instead of the $6350 2017 standard deduction for singles), you can gain more of an advantage from it by bundling some of your deductions.
One you can (often) bundle is property taxes: pay your 2017 property taxes in 2017 and also prepay your 2018 property taxes. So now if your property taxes are $4000/yr, by paying an extra $4000, the amount you can deduct goes up from $6500 to $10,500.
Now, you can also bundle your charitable deductions - so if you donate $1000/yr, you could donate $2000 in odd years and $0 in even years. So now you're deducting $12,500.
In even years, you don't pay your property taxes and you don't donate to charity, in odd years you do both.
In odd years, you get to take a large itemized deduction, in even years you take the standard deduction.
To do all this of course, you have to be wealthy enough to be able to prepay your property taxes and your charitable donations, and you have to not have a mortgage that requires you to escrow your property taxes.
As with many parts of the tax code, there is some modest benefit (a couple hundred to a couple thousand dollars a year) to the middle class, with the large benefit going to those wealthy enough and savvy enough to take the most advantage.
posted by matcha action at 10:52 AM on May 9, 2017 [6 favorites]
So for example if you are right on the cutoff get only a slight advantage taking the standard deduction (ie if it gets your typical itemized deductions are $6500 instead of the $6350 2017 standard deduction for singles), you can gain more of an advantage from it by bundling some of your deductions.
One you can (often) bundle is property taxes: pay your 2017 property taxes in 2017 and also prepay your 2018 property taxes. So now if your property taxes are $4000/yr, by paying an extra $4000, the amount you can deduct goes up from $6500 to $10,500.
Now, you can also bundle your charitable deductions - so if you donate $1000/yr, you could donate $2000 in odd years and $0 in even years. So now you're deducting $12,500.
In even years, you don't pay your property taxes and you don't donate to charity, in odd years you do both.
In odd years, you get to take a large itemized deduction, in even years you take the standard deduction.
To do all this of course, you have to be wealthy enough to be able to prepay your property taxes and your charitable donations, and you have to not have a mortgage that requires you to escrow your property taxes.
As with many parts of the tax code, there is some modest benefit (a couple hundred to a couple thousand dollars a year) to the middle class, with the large benefit going to those wealthy enough and savvy enough to take the most advantage.
posted by matcha action at 10:52 AM on May 9, 2017 [6 favorites]
Even with the mortgage interest deduction, we only come out a few hundred dollars over the standard deduction. If Trump's proposal to increase the standard goes through then that would blow away our itemized deductions.
Totally not seeing a huge subsidy of my mortgage on my tax bill here...
The subsidy is for people over-buying huge homes. My wife and I look every now and then when feel like owning a home at the Chicago bungalow belt because that is the size of house we would want/need and the interest deduction would not help us at all. Now if we could afford a 4 million buck Lakeview mansion it would be a real nice deduction that would probably help us buy a nice navy blue SUV to run people over with on our way to brunch.
posted by srboisvert at 10:52 AM on May 9, 2017 [4 favorites]
Totally not seeing a huge subsidy of my mortgage on my tax bill here...
The subsidy is for people over-buying huge homes. My wife and I look every now and then when feel like owning a home at the Chicago bungalow belt because that is the size of house we would want/need and the interest deduction would not help us at all. Now if we could afford a 4 million buck Lakeview mansion it would be a real nice deduction that would probably help us buy a nice navy blue SUV to run people over with on our way to brunch.
posted by srboisvert at 10:52 AM on May 9, 2017 [4 favorites]
the thing about the MID is that it isn't, on a per capita basis, all that much money.
It's not that much money at current, historically low interest rates. Until 1990 or so it was a good chunk of money.
posted by GuyZero at 10:54 AM on May 9, 2017 [8 favorites]
It's not that much money at current, historically low interest rates. Until 1990 or so it was a good chunk of money.
posted by GuyZero at 10:54 AM on May 9, 2017 [8 favorites]
Also - and this is neither here nor there - it benefits people in areas with high real estate prices more. So if you live in Kentucky where the average home price is $134K, it's not a big help. In San Jose where the average price is $1.085M it's a much bigger impact.
posted by GuyZero at 10:57 AM on May 9, 2017 [2 favorites]
posted by GuyZero at 10:57 AM on May 9, 2017 [2 favorites]
The coastal/high-dollar home bias was addressed in the article as one of the political reasons getting anything done is a non-starter. "liberal" politicians like Nancy Pelosi and Chuck Schumer represent a disproportionate share of the beneficiaries of the MID.
posted by Exceptional_Hubris at 11:08 AM on May 9, 2017 [3 favorites]
posted by Exceptional_Hubris at 11:08 AM on May 9, 2017 [3 favorites]
I would actually be really curious to know whether middle-class homeowners think they benefit from MID even if they don't. I'm planning to buy my first home, and I kind of assumed I would benefit from it, even though it sounds like I almost certainly won't. And my sense is that a lot of people have a pretty sketchy understanding of tax policy, especially if they don't do their own taxes or just stick some numbers into turbotax.com.
posted by ArbitraryAndCapricious at 11:19 AM on May 9, 2017 [5 favorites]
posted by ArbitraryAndCapricious at 11:19 AM on May 9, 2017 [5 favorites]
I would actually be really curious to know whether middle-class homeowners think they benefit from MID even if they don't. I'm planning to buy my first home, and I kind of assumed I would benefit from it, even though it sounds like I almost certainly won't. And my sense is that a lot of people have a pretty sketchy understanding of tax policy, especially if they don't do their own taxes or just stick some numbers into turbotax.com.
I think part of what plays into this is quasi-generational - when my parents bought their house, they had a double-digit interest rate, and then refinanced to a number that was still much higher than today's rates. I have a lot of generally business-and-dollar savvy Boomer relatives who have been urging me to buy, which I happen to be looking into anyway, and who keep telling me that "Uncle Sam will help a lot" but who're genuinely surprised when I point out the actual numbers involved.
posted by Tomorrowful at 11:31 AM on May 9, 2017 [3 favorites]
I think part of what plays into this is quasi-generational - when my parents bought their house, they had a double-digit interest rate, and then refinanced to a number that was still much higher than today's rates. I have a lot of generally business-and-dollar savvy Boomer relatives who have been urging me to buy, which I happen to be looking into anyway, and who keep telling me that "Uncle Sam will help a lot" but who're genuinely surprised when I point out the actual numbers involved.
posted by Tomorrowful at 11:31 AM on May 9, 2017 [3 favorites]
pols can keep their hands off the MID, whatevs. just create an RD. a simple, oh say 25% of rent paid. cool?
posted by j_curiouser at 11:38 AM on May 9, 2017 [2 favorites]
posted by j_curiouser at 11:38 AM on May 9, 2017 [2 favorites]
a simple, oh say 25% of rent paid. cool?
All this will do is increase rents and reduce tax revenues.
posted by GuyZero at 11:43 AM on May 9, 2017 [1 favorite]
All this will do is increase rents and reduce tax revenues.
posted by GuyZero at 11:43 AM on May 9, 2017 [1 favorite]
In my brief period of home ownership, I did not benefit from MID. I bought a very modest home, at a low rate of interest. I later sold it. Just before the housing bubble burst. If I hadn't sold when I did, I'd be one of those poor souls underwater. I am so disgusted that as a country we don't do something about housing and health care. This is a continent which has a climate that requires people to have housing. It's too cold in the winter and too hot in the summer. People can die without proper shelter.
posted by Katjusa Roquette at 11:48 AM on May 9, 2017 [3 favorites]
posted by Katjusa Roquette at 11:48 AM on May 9, 2017 [3 favorites]
I don't know if anyone can back me up on this but I recall the ratio of income to rent used to be 4 to one back in the early 80's. I'm not sure where this rule of thumb came from but now the expectation is that a person can afford 33 to 36 percent of their income going towards rent. This seems like a push me pull me kind of thing whereby if you used 25% you would not be able to charge as much rent because you would have fewer qualified tenants.
posted by Pembquist at 11:52 AM on May 9, 2017 [2 favorites]
posted by Pembquist at 11:52 AM on May 9, 2017 [2 favorites]
Somebody want to clue me in on what I'm doing wrong with respect to my taxes?
Are you deducting state taxes, real estate taxes, and gifts to charity? In our family, mortgage alone would not be more than standard deduction, but combine all the deductions and it's a nice benefit.
posted by polecat at 12:03 PM on May 9, 2017 [1 favorite]
Are you deducting state taxes, real estate taxes, and gifts to charity? In our family, mortgage alone would not be more than standard deduction, but combine all the deductions and it's a nice benefit.
posted by polecat at 12:03 PM on May 9, 2017 [1 favorite]
I've done the math a bunch of different ways, and with our current situation, we just don't have that much to deduct. I too though "oh, cool, mortgage interest deduction!" but after I saw the first statement, realized my house is just not that expensive (which is GOOD, right?), and threw them in the file of useless papers that I should probably hold onto.
posted by epersonae at 12:10 PM on May 9, 2017 [1 favorite]
posted by epersonae at 12:10 PM on May 9, 2017 [1 favorite]
For those wondering, looks like our cheap home and low interest rate is why we don't see a big benefit from the MID.
I'm glad my house was cheap. I'd much rather be here than getting a bigger tax break.
posted by keep_evolving at 1:15 PM on May 9, 2017 [1 favorite]
I'm glad my house was cheap. I'd much rather be here than getting a bigger tax break.
posted by keep_evolving at 1:15 PM on May 9, 2017 [1 favorite]
Price of house is a big factor here, which means location.
In West LA or most of SF, not only are median home prices usually over $1M, but state tax is ~10%, so for people who can afford homes its not hard to have deductions over standard deduction.
Of course, many/most people just can't afford houses at all, so its still a deduction for the high end of the middle class & the upper class. But removing the MID would shift home ownership even more into an "upper class only" situation.
posted by thefoxgod at 2:22 PM on May 9, 2017
In West LA or most of SF, not only are median home prices usually over $1M, but state tax is ~10%, so for people who can afford homes its not hard to have deductions over standard deduction.
Of course, many/most people just can't afford houses at all, so its still a deduction for the high end of the middle class & the upper class. But removing the MID would shift home ownership even more into an "upper class only" situation.
posted by thefoxgod at 2:22 PM on May 9, 2017
Planet Money did a show a few years back where they asked a bunch of economists from over the political spectrum to rewrite policies. The economists agreed on six things, and number one was to eliminate the mortgage tax deduction.
posted by Cuke at 2:41 PM on May 9, 2017 [4 favorites]
posted by Cuke at 2:41 PM on May 9, 2017 [4 favorites]
The mortgage deduction is just one of the things that drives up the price. If we didn't have it, the houses would be the same amount affordable, just at a lower price point. The money gets skimmed off by the market and none of us have it.
But since it already exists, taking it away will take equity away from the only asset most people have.
posted by elizilla at 2:46 PM on May 9, 2017
But since it already exists, taking it away will take equity away from the only asset most people have.
posted by elizilla at 2:46 PM on May 9, 2017
But removing the MID would shift home ownership even more into an "upper class only" situation.
Not necessarily. Home prices would decline proportionately.
posted by JackFlash at 2:47 PM on May 9, 2017
Not necessarily. Home prices would decline proportionately.
posted by JackFlash at 2:47 PM on May 9, 2017
Well, in SF for example all-cash offers are not rare (I know a couple people who got beat out by them), so for some rich people the MID is just not a factor in price at all and removing it will have no effect.
Not necessarily. Home prices would decline proportionately.
How does that help current mortgage holders?
posted by thefoxgod at 2:48 PM on May 9, 2017
Not necessarily. Home prices would decline proportionately.
How does that help current mortgage holders?
posted by thefoxgod at 2:48 PM on May 9, 2017
It doesn't, but it's trivial to write legislation such that new mortgages aren't deductible but existing ones are.
posted by ROU_Xenophobe at 2:50 PM on May 9, 2017
posted by ROU_Xenophobe at 2:50 PM on May 9, 2017
How does that help current mortgage holders?
Have a short phase out period. The average mortgage only lasts seven years before the owners move.
posted by JackFlash at 2:52 PM on May 9, 2017
Have a short phase out period. The average mortgage only lasts seven years before the owners move.
posted by JackFlash at 2:52 PM on May 9, 2017
Boy is economics not my strong suit, but I think the problem is that the MID has been artificially inflating the price of property, so a lot of people would see the value of their homes go down if it were done away with and the housing market were corrected. And probably that's what should happen, but it would be a big problem for a lot of people, even if they were able to continue to deduct their own mortgages.
posted by ArbitraryAndCapricious at 2:57 PM on May 9, 2017 [3 favorites]
posted by ArbitraryAndCapricious at 2:57 PM on May 9, 2017 [3 favorites]
The current low-interest environment would be the best time to get rid of the MID as it would create the lowest impact in absolute terms but yeah, ultimately it's a subsidy and if you remove it home prices will fall. But better now when the difference is low than later when the difference may be big.
Well, in SF for example all-cash offers are not rare (I know a couple people who got beat out by them), so for some rich people the MID is just not a factor in price at all and removing it will have no effect.
Thankfully most areas are not SF/Vancouver/Toronto where there's a big influx of foreign all-cash offers. Besides, put a bump into housing values and investors may decide to dump their money somewhere else for a while.
Also, re: itemized deductions, I check last year's tax return... I nearly clear the threshold with the amount of property tax I pay by itself. Living in one of the crazy property value places in the US is indeed like living on a different planet.
posted by GuyZero at 3:09 PM on May 9, 2017 [4 favorites]
Well, in SF for example all-cash offers are not rare (I know a couple people who got beat out by them), so for some rich people the MID is just not a factor in price at all and removing it will have no effect.
Thankfully most areas are not SF/Vancouver/Toronto where there's a big influx of foreign all-cash offers. Besides, put a bump into housing values and investors may decide to dump their money somewhere else for a while.
Also, re: itemized deductions, I check last year's tax return... I nearly clear the threshold with the amount of property tax I pay by itself. Living in one of the crazy property value places in the US is indeed like living on a different planet.
posted by GuyZero at 3:09 PM on May 9, 2017 [4 favorites]
The average mortgage only lasts seven years before the owners move.
Huh, I believe you about the average but I have never known anyone who only lived in a house for 7 years after buying it. It's also not uncommon to stay in a house for decades.
I am still hoping/planning to get the hell out of the US so it probably won't end up affecting me, but unless home prices really did fall a lot the difference in affordability would affect me and a lot of people I know (because LA/SF). Given how fast house prices have been rising I'm skeptical the market is rational enough to adjust as it "should".
posted by thefoxgod at 4:14 PM on May 9, 2017 [1 favorite]
Huh, I believe you about the average but I have never known anyone who only lived in a house for 7 years after buying it. It's also not uncommon to stay in a house for decades.
I am still hoping/planning to get the hell out of the US so it probably won't end up affecting me, but unless home prices really did fall a lot the difference in affordability would affect me and a lot of people I know (because LA/SF). Given how fast house prices have been rising I'm skeptical the market is rational enough to adjust as it "should".
posted by thefoxgod at 4:14 PM on May 9, 2017 [1 favorite]
I struggle to think of anyone who has lived in a given house more than 7 years. Perhaps it's a regional thing?
posted by ragtag at 7:28 PM on May 9, 2017 [1 favorite]
posted by ragtag at 7:28 PM on May 9, 2017 [1 favorite]
Talking about the mortgage interest deduction in historical terms makes no sense. We have the system we have now because prior to the mid-80s tax reform all interest was deductible, whether it was on a home loan, a revolving account, an installment loan, or anything else. The tax reform limited deductibility to home loans, student loans, and business loans, thus making the whole scheme far more regressive than it originally was.
If you want to make the mortgage interest deduction less regressive without destroying what little wealth most middle income people presently have, it's pretty simple: Make it work like student income interest does (or did back when my SO was just out of college, she's long been above the phase-out now) for low(ish) income earners. The deduction goes on top of the standard deduction, rather than replacing it.
That's not to say I wouldn't be all for eliminating the deduction for all but one's primary residence, though. If someone lives in an RV, fine, but if they use it 5 months out of the year and have another home they live in the other 7 months, it's just a windfall to them.
Better yet, make all interest up to some reasonable amount (say, $30,000 a year, just as a first pass example pulled out of thin air) deductible again and stack it on the standard deduction. Then poor people subsisting on payday loans or high interest credit cards won't have to pay tax on the usurious interest rates, but there will be a limit to how much the wealthy benefit without taking it away entirely and messing up the housing market.
posted by wierdo at 7:43 PM on May 9, 2017 [1 favorite]
If you want to make the mortgage interest deduction less regressive without destroying what little wealth most middle income people presently have, it's pretty simple: Make it work like student income interest does (or did back when my SO was just out of college, she's long been above the phase-out now) for low(ish) income earners. The deduction goes on top of the standard deduction, rather than replacing it.
That's not to say I wouldn't be all for eliminating the deduction for all but one's primary residence, though. If someone lives in an RV, fine, but if they use it 5 months out of the year and have another home they live in the other 7 months, it's just a windfall to them.
Better yet, make all interest up to some reasonable amount (say, $30,000 a year, just as a first pass example pulled out of thin air) deductible again and stack it on the standard deduction. Then poor people subsisting on payday loans or high interest credit cards won't have to pay tax on the usurious interest rates, but there will be a limit to how much the wealthy benefit without taking it away entirely and messing up the housing market.
posted by wierdo at 7:43 PM on May 9, 2017 [1 favorite]
There's bound to be serious differences between the set that matches the seven year figure, and lifetime ownership. Maybe throw in the buying down for retirement. It almost implies a single solution won't work. Like stronger regional lines in banking might help. Too bad that stuff's been discredited and off the menu.
posted by Strange_Robinson at 9:18 PM on May 9, 2017
posted by Strange_Robinson at 9:18 PM on May 9, 2017
Government subsidies disproportionately benefit the wealthy?
Shocking.
They write the laws, and control the bureaucracy, so why shouldn't it benefit them?
As long as government controls the tax code and regulations nothing will change.
posted by NeoRothbardian at 9:22 PM on May 9, 2017 [2 favorites]
Shocking.
They write the laws, and control the bureaucracy, so why shouldn't it benefit them?
As long as government controls the tax code and regulations nothing will change.
posted by NeoRothbardian at 9:22 PM on May 9, 2017 [2 favorites]
> As long as government controls the tax code and regulations nothing will change.
Without controlling the tax code and regulations, the government cannot exist. Great if you're a Libertopian and believe that the free market / rational self interest will be enough to sustain a functioning society, bad if you've ever encountered actual human beings.
posted by tonycpsu at 7:37 AM on May 10, 2017 [2 favorites]
Without controlling the tax code and regulations, the government cannot exist. Great if you're a Libertopian and believe that the free market / rational self interest will be enough to sustain a functioning society, bad if you've ever encountered actual human beings.
posted by tonycpsu at 7:37 AM on May 10, 2017 [2 favorites]
As long as government controls the tax code and regulations nothing will change.
This is tautological.
posted by GuyZero at 10:17 AM on May 10, 2017
This is tautological.
posted by GuyZero at 10:17 AM on May 10, 2017
As long as government controls the tax code and regulations nothing will change.
This is nonsense. "Government" is not a synonym for the wealthy, regardless of the degree of current regulatory capture. Government is and should be us, everyone, the people and their duly elected representatives. Who exactly is supposed to control the tax code but the government? It's a governmental function!
posted by vibratory manner of working at 11:49 AM on May 11, 2017 [1 favorite]
This is nonsense. "Government" is not a synonym for the wealthy, regardless of the degree of current regulatory capture. Government is and should be us, everyone, the people and their duly elected representatives. Who exactly is supposed to control the tax code but the government? It's a governmental function!
posted by vibratory manner of working at 11:49 AM on May 11, 2017 [1 favorite]
The average mortgage only lasts seven years before the owners move.
Huh, I believe you about the average but I have never known anyone who only lived in a house for 7 years after buying it. It's also not uncommon to stay in a house for decades.
Interestingly, there was an article about this in the NYTimes this morning: Real Estate’s New Normal: Homeowners Staying Put. The graph in the article shows very clearly how "The median length of time people have owned their homes rose to 8.7 years in 2016, more than double what it had been 10 years earlier."
posted by Dip Flash at 8:09 AM on May 14, 2017
Huh, I believe you about the average but I have never known anyone who only lived in a house for 7 years after buying it. It's also not uncommon to stay in a house for decades.
Interestingly, there was an article about this in the NYTimes this morning: Real Estate’s New Normal: Homeowners Staying Put. The graph in the article shows very clearly how "The median length of time people have owned their homes rose to 8.7 years in 2016, more than double what it had been 10 years earlier."
posted by Dip Flash at 8:09 AM on May 14, 2017
Interesting, Dip Flash. I am really finding this to be true:
posted by ArbitraryAndCapricious at 9:22 AM on May 14, 2017 [2 favorites]
Homeowners are moving less, creating a drag on the economy, fewer commissions for real estate brokers and a brutally competitive market for first-time home shoppers who cannot find much for sale and are likely to be disappointed by real estate’s spring selling season.In my area, it's just a brutal market for first-time homebuyers and anyone hoping to buy a small, relatively inexpensive house. There's almost nothing on the market, and anything that gets listed has multiple offers in the first couple of hours. People are doing things like offering to forgo inspection in order to make their offers stand out. It's nuts.
posted by ArbitraryAndCapricious at 9:22 AM on May 14, 2017 [2 favorites]
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posted by Bulgaroktonos at 8:05 AM on May 9, 2017 [5 favorites]