Common Sense Housing Investment Act

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Rep. Keith Ellison (D-MN) reintroduced today the Common Sense Housing Investment Act  (H.R. 1662) to make it easier for middle class and working families to find affordable rental housing and benefit from homeownership.

“The Common Sense Housing Investment Act provides a more generous tax benefit for more working families with mortgages and makes a significant contribution to addressing the rental housing crisis. It would enable 16 million more current homeowners with a mortgage to receive a bigger tax break. It also makes a significant contribution to the gap of 7 million affordable rental homes needed for extremely low-income families

The bill realigns the mortgage interest deduction to better benefit families who need it most by converting the mortgage interest deduction to a 15% flat rate tax credit on interest paid on mortgages up to $500,000. Proponents say the bill expands the tax benefits for more homeowners, while giving working families, people with disabilities and the elderly better access to rental homes.  The part about working families, people with disabilities and the elderly better access to rental homes remains to be seen. By converting the mortgage interest deduction to a 15% credit, 60 million homeowners would receive the tax credit, up from 43 million, according to the Tax Policy Center. Because the mortgage interest deduction requires homeowners to itemize their tax deductions, less than half of all homeowners currently deduct interest on their mortgage. Converting the deduction to a credit would benefit all those paying mortgage interest.

The bill also lowers the deductible cap on allowable interest paid on a mortgage from $1 million to $500,000. It retains the allowance for home equity lines of credit and allows second homes within the $500,000 cap on mortgage interest paid. These changes are phased in over five years. Currently, according to Kiplinger, “If you use the place as a second home — rather than renting it out as a business property — interest on the mortgage is deductible just as interest on the mortgage on your first home is. You can write off 100% of the interest you pay on up to $1.1 million of debt secured by your first and second homes that was used to acquire or improve the properties.”

Proponents argue the bill would generate more than $200 billion in revenue over ten years, which would help provide critical resources to address the national rental shortage. The government spends nearly four times as much on homeownership compared to investments in rental housing, and nearly half of all using rental housing pay more than 30% of their income for housing. The shortage primarily affects people under 25, the elderly, people with disabilities and low-income families. The bill invests the new revenue in expanding the Low Income Housing Tax Credit, Section 8 rental assistance and the public housing capital fund, and provides a source of permanent funding for the National Affordable Housing Trust Fund.

More than 1,900 national, state and local organizations have endorsed better targeting the mortgage interest deduction …and scores of economists and academics have recommended converting the mortgage interest deduction to a mortgage interest credit.

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