Article on getting rid of the mortgage interest deduction

This isn't some obscure, fringe, gadfly idea. There has been a strong consensus among economists for many years that the mortgage interest deduction is both inefficient and regressive, for all of the reasons cited in that article. Unfortunately, like many lousy policies, it's very difficult to change.

I see your point of view but the mortgage deduction has done a lot to help people buy homes in this country. It helped allow me to purchase my first house 25 years ago and gave me an economic step up the ladder. I would agree with capping the amount of the deduction but that would obviously hurt high costs areas like New York. Maybe it should be tied to some housing affordability index.

The good part of the mortgage deduction is that it was widely applied, although, people with those huge houses are benefiting more,as was pointed out in the article. Still, everyone did benefit.

A nation of renters will probably not give us strong, stable communities with people who care about the local conditions and try to change things for the better. Renters are always thinking about picking up and moving to the next place, not necessarily putting down roots. Besides that, it is good for people to know the true costs of things, for once in their lives, and they know that when they own an asset. People who own can even make a profit, an incentive to maintain and improve the housing stock.

Makes me wonder how anybody survives in Canada. Its insulting enough not to have a mortgage deduction but when you couple that with a 50% effective tax rate and ridiculous weather, well... that's why I'm here.

At the end of a 25 year boom, it does appear looking backward that the mortgage deduction provided benefits, but I think if you look at it objectively in about 5 years it will be a different story. Encouraging home ownership by ever larger proportions of the population contributed to the rise in housing prices and consequently in leverage. A lot of people will have had their financial positions severely damaged by having bought overpriced real estate enabled by tax deductible mortgages and more than a few will have lost those properties. Some incentive to saving some proportion of money might have been a better alternative. People who own also have a lot more to lose and everyone is starting to understand that now.

They don't survive in Canada, they come to the states for higher wages while holding on to their subsidized heath care in Canada. They are people who want to be able to have their cake and eat it too. I work with a bunch of Canadian guys. Of course, everybody hates that weather, who wouldn't. We haven't kept enough body hair to survive in that climate.

"A lot of people will have had their financial positions severely damaged by having bought overpriced real estate enabled by tax deductible mortgages and more than a few will have lost those properties. Some incentive to saving some proportion of money might have been a better alternative. People who own also have a lot more to lose and everyone is starting to understand that now."

We're back to the notion that people should buy what they can afford, not leveraging themselves to the hilt, mortgage interest deduction or no mortgage interest deduction. I have managed to survive twenty five years with the mortgage interest deduction without wreaking financial havoc on myself. Of course, I never bought houses I could not afford, have never purchased a new car, and pay for everything as I go, no credit card debt.

Sure, owners have a lot more to lose, but that is part of being an adult and playing in the big leagues. You don't have a landlord to blame when things get tough.

Bully for you. I don't disagree with your personal responsibility argument but people are going to do what they are incented to do and we are talking about a policy here.

People were not incented to drive themselves into financial ruin by the mortgage interest deduction, at least for those people who had any sense. Sure, you get a little cost relief with the mortgage interest deduction, but I never saw it as an excuse to try to buy the biggest house in the world. The whole country needs a mandatory financial responsibility course.

"I see your point of view but the mortgage deduction has done a lot to help people buy homes in this country."

You lie. As virtually every economist, financial reporter, and wall street analyst who has EVER written on this subject has pointed out repeatedly, home ownership rates are as high or higher in many other wealthy nations, like Denmark, the UK, Canada, Australia, etc. The ONLY difference is Americans by larger larger houses than they need because the purchase is subsidized. Unless you actually know relative home ownership rates elsewhere, you speaking from pure ignorance.

mortgage deduction removed for families earning over 150k... change that you can believe in!

It wouldn't surprise me since the liberal democrats have arbitrarily decided that families making over 150k should receive NO government benefits but be the ones paying for them!

This is a complicated question and calling me a liar does not win you any points. The mortgage interest deduction has made home ownership more affordable by subsidizing some of the cost. Have you actually ever bought a house?

Read here for more on home ownership across the world...

"The terms home and homeownership are not defined consistently worldwide. Among industrialized nations, definitions and measurement can significantly differ from one country to the next. In the U.S., for example, a housing unit is defined as a house, an apartment, a mobile home, a group of rooms, or a single room that is occupied as separate living quarters with a registered street address. In Canada, a private dwelling is defined as a set of living quarters designed or converted for human habitation in which a person or group of persons reside or could reside. In addition, a private dwelling must have a source of heat or power and must be an enclosed space that provides shelter from the elements, as evidenced by complete and enclosed walls and roof and by doors and windows that provide protection from wind, rain and snow.2 According to Canada's definition, only four out of ten dwelling units in India, the units having socalled "permanent" facilities, would qualify as homes.3

In the United States, a housing unit is owner-occupied if the owner or co-owner lives in the unit, even if it is mortgaged or not fully paid for. In the UX, long leaseholds are recognized as owner occupation even though the actual lease is owned by someone other than the homeowner.4 In Japan, dwellings that are owned by parents of the households occupying them are also considered owned houses. The homeownership rate in the U.S. is computed by dividing the total number of households that are owners by the total number of occupied households.5 The European Mortgage Federation defines the homeownership rate simply as the percentage of dwellings owned outright or purchased with a mortgage in relation to total dwelling stock. In the developed world, broad definitions are coupled with a comprehensive and robust land and titling infrastructure, which is more often than not absent in the developing world. In emerging markets, simply obtaining definitions can be difficult. Another shortfall of homeownership rates as indicators of the quality of a country's housing finance system is that they demonstrate very little about the quality of private owner-occupied housing. The breadth of definitions utilized by various countries to define households and homeownership implies that the quality and infrastructure of housing can vary significantly around the world. "

lots more here.

http://www.allbusiness.com/finance/1016522-1.html

making rents tax deductible would be more politically palatable and it's a way to end the over emphasis on homeownership.

"People were not incented to drive themselves into financial ruin by the mortgage interest deduction, at least for those people who had any sense."

I never said it was solely resposible, but on an aggregate basis, I would argue that it has in fact contributed to the problem. Not as much as securitization of mortgages and not as much as artificially low interest rates, but it is part of the cluster of policies that led us here and needs to examined.

"The whole country needs a mandatory financial responsibility course." No argument with that.

Renters own no assets are not taking any risk. Why should their rent be tax deductible? I do not think it makes any sense.

We don't really want a country of renters. Look at how much trouble the rent stabilizers cause in New York. Do you really want that model applied to the country? What a nightmare.

407PAS: Ignore the ad hominems.

Why do people always feel that national comparisons made in vacuum make their point? Perhaps there are a slew of other regulations, population flows, cultural norms, etc. that might affect home ownership rates?

Agree that we don't want a nation of renters but neither do we want a group of owners who should not have ever bought, which is clearly what we have.

The vast majority of people have no business owning real estate.

A tax deduction did not cause the bubble or meltdown.

Taking away the mortgage interest deduction would be a sllap in the face to all the people who skimped and saved and made it to the point where they can buy a home... the interest deduction gives people that critical financial buffer at the end of their tax year. Yeah richer people benefit more than the poor... but so what... rich people at one point in time were poor. Instead of "blowing my huge tax refund" like some people at year end, I plan on that credit to come through so I can either save for a rainy day or pay down debt from college etc. If they take that away I'll have to work harder to earn more money to replace that lost credit which means I'll be paying more taxes and will have to earn more pretax to get to the actual after tax $ amount. Penalize me more for having a job, saving, being a responsible homeowner why don't you.

Understand your lament, but prices would adjust to the different financing environment making the place you want that much cheaper. The people who will actually get crushed by a change are existing owners that need to sell. This is why it will never get changed, but that doesn't mean it works as it was intended or doesn't have adverse consquences.

Perhaps we have erred on the side of incenting some people to buy when they should have kept renting. Unfortunately, those people are now experiencing the risks that come with ownership. I wish people would have been better advised of the risks so that they didn't sign up for the riskier loan products.

There is lots of blame to go around. I'll take a shot at the home builders, who only seem to be able to build huge houses that nobody can afford. I'm not impressed by what they have foisted on the American home buyer. I don't think I would want to pay the heating or cooling bills on most of those suburban barns, never mind live in them.

As for Europe being the land of home ownership, I doubt it. Land use restrictions make it very expensive to buy or build new. I have in-laws in France who are having a house built. Even though they are living in the old family house, which they never had to buy, they are still going off and building a new house. They are trying to save money, so my brother-in-law, the poor guy, is doing all of the interior finish work, even though he already works a full time job and has a new baby. Men often bury themselves with the amount of work they take on.