The St Louis Contrarian

Providing Independent and Intelligent Insight on St. Louis Public Policy Issues

Archive for the tag “mortgage interest deduction”

Urban Development and Privilege

Much has been written recently about the concept of white privilege. I  find the term somewhat offensive because it makes people defensive. Nevertheless, the concept is true

There are a couple areas of middle class privilege that contribute negatively to the well being of communities.   The first is the mortgage interest deductions. This deduction primarily helps higher income people, and artificially drives up the price of housing. Working class people who do not itemize are hurt. This by the way is the biggest housing subsidy. A tax credit targeted to working class people would be more effective

A second set of privileges cover zoning and planning laws in our communities. These laws tend to zone out smaller and more affordable housing and Multifamily housing. I am not talking about housing homeless people but teachers social workers, nurses etc.    

The results of these policies are unnecessary segregation , a lack of mobility, and urban decline.  Written by paul Dribin

Mortgage Interest Deduction

The mortgage interest deduction on federal income tax is by far the biggest housing subsidy available. It far surpasses Section 8, LIHTC, or other forms of subsidy. The major problem with this subsidy is because it primarily benefits higher income households. That is because a tax deduction only benefits households who itemize and those with a more substantial tax burden. Most of the benefit of this deduction goes to households earning over $200,000 a year. This program hurts central cities more than suburbs for the following reasons:

1. As stated before, less expensive houses provide less of a deduction to affluent purchasers. The present system actually provides incentives for middle and upper middle income households to buy more expensive homes which are generally located in suburbs.

2. Renters who are more common in the central city receive not subsidy at all.

The National Low Income Housing Coalition has a United for Homes campaign which attempts to rectify the housing tax deduction issue. The policy they advocated would limit deductions to $500000 of interest, and provide a 15% tax credit to households which would much more adequately address the needs of lower income homeowners. The billions in cost savings would be used to subsidize new affordable housing. Check out the website Unitedforhomes.org

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