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Message from the President
November, 2010
HOME OWNERSHIP MATTERS!
One of the long-standing benefits of homeownership in this country is the deductibility of mortgage interest paid on up to $1 million of combined debt on a principal residence and one secondary residence. Interest on up to $100,000 of home equity loan debt is also deductible. Lately there's increasing chatter about the possibility of eliminating this deduction as a way to trim a federal deficit that has been growing over the years spanning both Republican and Democratic administrations. This seems to me to be a misguided idea. Here's why:
Homeowners already pay the bulk of federal income taxes (between 80% and 90% of all federal income taxes collected). Increasing their tax burden would be unfair.
The economic meltdown spawned by reckless Wall Street practices and careless lending has homeowners reeling from declining property values. Eliminating this significant home ownership incentive would further erode those values--by an additional 15%, according to Lawrence Yun, Chief Economist for the National Association of REALTORS®. Since a vibrant housing market is a key economic driver (every home purchased pumps $60,000 into the economy and approximately 19% of GDP centers on housing), any further erosion in this arena would negatively impact many other sectors.
De-incentivizing homeownership would lessen the many other beneficial effects that homeownership creates. For example, owning a home has long been one of the best ways to build wealth. Historically, a homeowner's net worth is between 31 and 46 time greater than a renter's. Further, studies have shown that people who own homes are more likely to vote, volunteer and contribute to their neighborhoods. And homeowners move less frequently than renters, providing better neighborhood stability, reduced crime and improved neighborhood upkeep. Also, on average, children of homeowners do better in school and stay in school longer.
Last, but certainly not least, Americans value homeownership. By overwhelming margins they do not want the tax credit tampered with. In a survey commissioned in September of this year by the National Association of Home Builders, 80% of respondents said they support retaining federal tax incentives to promote homeownership. Even when told that eliminating the mortgage interest deduction would help ease the federal deficit, 72% still opposed abolishing it. And these results cut across all partisan lines. Among Republican respondents, 72% wanted to retain the mortgage interest deduction; among Democrats, 64%; Independents, 75%; current homeowners, 75%. Even 55% of renters wanted to keep the interest deduction.
REALTORS® have to get this important message out. Owning your own home is an integral part of the American dream and it also represents our livelihood. The National Association of REALTORS® is making this a major campaign in the coming year. We all need to add our voices so the word gets to our elected officials: Home Ownership Matters!
Bob Dohn
2010/11 RANWC President
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