While the mortgage and real estate industries are trying to find solid footing in this soft market, Capitol Hill in Washington is getting ready to unveil this fall wide-ranging legislation that would address climate change, more specifically the reduction of carbon emissions. The goal is a cutback of 60 to 80% by the year 2050, an ambitious endeavor. It is to be achieved by raising taxes on gasoline and eliminating the mortgage interest deduction on homes over 3,000 sq. ft. The so-called McMansions.
Everybody is aware about cars and the pollution they produce, but houses, too, are large greenhouse-gas emitters. It happens through cooling, heating, building materials and power usage, areas that many of us don't really consider that harmful.
Soon after the legislative draft was circulated, the building and real estate industries found all sorts of problems with it. Home builders are reminding everyone how green they have gone over the last several years. That homes today are the most energy-efficient in recorded history. It's true that advances have been made in appliances, materials, building techniques and windows, for instance. Perhaps they pace should be quickened, though.
NAR, or National Association of Realtors, has quickly produced various statistics showing how doing away with the mortgage interest deduction for properties over 3,000 sq. ft. would negatively affect the overall market. This write-off removal seems to have generated the most comments. Supposedly prices would decline and foreclosures would rise. It's difficult to prove these claims either correct or incorrect. It actually appears to be kind of posturing from an interest group that has its own spoon in the soup.
The important thing here is that a draft will be introduced and then the debate can begin. The matter is to be taken seriously. Some are arguing now that this legislature would just inflame the current turbulence in the marketplace, but that's unlikely. If this action ever becomes a law, it'll take a couple of years, minimum. Large initiatives like this just don't get done in a month or two. By then the troubles are over and the real estate market is back on a solid ground again.
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I can't believe that congress would eliminate the mortgage interest deduction even on the McMansions in this current real estate climate.
They may be challenged, but their aren't complete idiots.
I heard something of this in the works earlier this year. This would definitely impact the decision to buy a home on at any price range. They'll start with the larger homes and work their way down.
Esko -- These Bozos need to know that the Real Estate industry is huge and we have a long memory. As soon as this is introduced we all need to slam them with phone calls, email and snail mail telling them to go ahead and make our day. This year I am not voting for any incumbent. These bozos have not earned a pennies worth of what they have been paid and I am fed up. Aloha
Marty,
If the write-off removal ever happens, it would be years from now.
Lori,
Starting from the higher end has a small chance and they know it.
Bruce,
Over the decades similar drafts have been introduced and they've never gone very far.
i'd really like to see what they based the assumption that foreclosures would increase (3000+) if the income deduction is removed. it doesn't change the monthly payment one way or another.
Jay- the affordibility factor would decrease. Some large homes are not worth that much. The mortgage is cutting the out of pocket expenses of owning by 25-30%. It would be a papaerwork nitemare.
Hi Esko,
I think the whole system is so screwed up ..I'm not sure whether it is or not a benefit.
The Congress is so addicted to more and more money, they don't even care what the voting public care about any more. They get their money from their pet special interests and the average voter has no influence excpet for the occasional photo-op.
The only thing that would save the mortgage industry deduction would be if the talk show industry took up the cause. Fat chance. Not sexy enough.
i don't think an elimination or a cap based on sq. ft. willever happen. talk about an idea that would
really kill the market!!! mike
I think it highly unlikely it would pass, but I agree they are so addicted to money they don't think about what that lack of money working in the market place would do to bring the economy down for sure.
I read the entire law (bill) that is going to be proposed on my state senators website. They are only talking about taking away a very small percentage of the deduction for a very small percentage of people...frankly not worth all the this time.
Ahahhhh!!!
That's it!! Raise taxes.... that will fix it.....
We cannot complain.... we elect these boobs
I have been hearing about this for 5 years, only because that is how long I have been in the industry to even care.
I wonder who came up with the notion that a 3000 sqft home is a McMansion? Here in Minnesota, almost every home has a basement. If you finish it, then almost everyhome would then have 3000 sqft, hardly a mansion in our books.
Esko - I seriously doubt that congressmen and senators are going to take away their own interest deductions for their own mansions. They don't hesitate to pass legislation that affects you and I but when it hurts their own pocketbook I don't remember them ever passing that kind of legislation.
Interesting post. We'll all have to watch as this unfolds.
This would be a double wammy for a lot of people. Higher interest rates on Jumbo loans and no deduction.
My prediction: ain't gonna happen!
NAR, mortgage bankers, and the entire real estate industry will line up against this half baked, proposed legislation.
I always question these side bills.... so people will fight assessments now to show their house is under 3000sf?
This is just silly... what about the family with 17 kids in Arkansas.... they should live in under 3000sf?
Jay,
Some economist over there probably worked the numbers to come out right.
Eric,
It would be a complex undertaking.
Neal,
It seems to help the middle class with their budget. Complex, yes.
Lenn,
Special interests are going to play a large role in this debate.
Michael,
I'm really unsure on how it would affect the market. More study needed.
John,
It appears to have a slim chance as it is.
Jim,
Thanks. The post highlights the main points, details are deeper in the draft.
Tom,
Isn't that the truth. We put these people in there.
Ethan,
This argument is almost as old as the hills.
Jennifer,
The square footage is certainly going to be in the center of this debate.
George,
These guys are the masters at protecting their own interests.
Bob & Carolin,
It'll be out there in the media starting this winter, I'd think.
James,
You make a good point now that jumbos are more expensive.
Jim,
That's for sure. These groups are not going to take it without a stiff fight.
David,
Right, huge arguments would develop over what size someone's house is, if it's around the cutoff point.
My take on this is that there are too many legislators that own two houses, of which at least one is probably bigger than 3,000 sq. feet. They're not going to take away their own tax deductions. I don't believe it. This is just political posturing - I wonder what the real issue is?
Kate,
Some of them could be serious about it, but the majority probably won't for that reason.
The government is looking for any way to raise income. Spending has been out of control for years and they are just looking for any way to increase treasury funds. Just how many Americans would be effected? Certainly not the middle and lower class....well perhaps the upper middle class. The thing is, it won't pass because the people that would be effected vote. -Charles
thanks for the info
Charles,
They are trying it now under the banner of reducing greenhouse-gas emissions. It has a long road ahead.
Joshua,
Wait until the real debate in Washington starts.
It would seem counter productive to eliminate the larger homes. The homes where owners will typically spend huge sums of their incomes (Taxed) on Theatre Rooms (Expensive, Taxed and utilizes both products and services(Generates LOCAL income)), Outdoor Living Rooms (Ditto) Landscaping (Ditto), Commerical style kitchens (Ditto, Ditto, Ditto). McMansion owners tend to spend more on entertainment, travel, shopping and utilize more hired help (Plumber, Gardener, electrician, Gen contractor). They also tend to drive more expensive vehicles and buy more often than average (Read: Tax dollars, use of services). So, why not take them out of the market? Make them perpetual renters? Of course, tax savings should never be the only motivatin for purchasing a home but........do we want to risk the potential revenue? Great post Esko. Yes, much debate to hear on this subject!
Chris,
That's an interesting way to look at the issue. Let's see what, if anything, comes after the debate is over.