1. MEMORANDUM
TO: Professor Dennis B. Drapkin
FROM: Douglas D. Haloftis
DATE: May 5, 2015
RE: Replacing the Mortgage Interest Deduction with a Tax Credit
I. Executive Summary
American home mortgage holders have been able to deduct mortgage interest
expense since the Tax Code was first enacted in 1913. The mortgage interest deduction
was not unique at the time because all consumer interest was deductible. For decades
following the enactment of the Tax Code, no legislative impetus appeared to exist to use
the deductibility of mortgage interest as a tool to incentivize homeownership – at least
not until 1986, when President Reagan inoculated the mortgage interest deduction when
its elimination and that of all other consumer interest was being considered. Since that
time, the mortgage interest deduction has been imbedded in the American psyche and
indelibly linked to homeownership.
Yet, there is no convincing evidence that the mortgage interest deduction has
significantly enhanced homeownership rates. Irrefutable empirical evidence exists,
however, that the mortgage interest deduction has instead encouraged higher-income
taxpayers to incur greater amounts of mortgage debt and more highly leveraged loans,
while reaping greater and disproportionate benefits from the deduction. In accomplishing
this – no doubt – highly unintended consequence, the mortgage interest deduction has
become the country’s third largest tax expenditure behind the exclusion for imputed net
income and employer medical insurance premiums.
Worse, the home mortgage interest expenditure disproportionately benefits
taxpayers in the $100,000 to $200,000 income range, who are able to afford larger
mortgages and who would be likely to own a home irrespective of the deduction.
Currently, almost 77% of the roughly $93 billion mortgage interest tax expenditure
benefits little more than 10% of eligible taxpayers. Thus taxpayers in these higher
income brackets enjoy greater benefits from the mortgage interest deduction than
taxpayers in the lower brackets, many of whom receive no benefit at all from the
mortgage interest deduction as a consequence of the standard deduction.
The inequities associated with the mortgage interest deduction are not new. Calls
for reform have existed since the 1950s. In the last 20 years, a number of proposals have
been put forward calling for the replacement of the mortgage interest deduction with a
refundable or non-refundable tax credit. Replacing the deduction with a 15% non-
refundable tax credit on mortgages up to $500,000 would provide for a fairer and more
equitable distribution of the benefit among homeowners. Further, replacing the

2. 2
deduction with a credit would result in a revenue savings of approximately $200 billion
over the next 20 years. It would do so without substantial negative impact on the housing
industry because the increased benefit going to lower income households would spur
housing investment from within that group and, to the extent that mid- to higher-income
taxpayers would be adversely affected, prevailing positive economic conditions would
serve as a buffer.
Such reform would redirect the tax advantage of homeownership to its professed
purpose: stimulating homeownership without encouraging over investment in housing
and mortgage debt. Many sensible variations of a mortgage credit have been proposed to
date. The only thing that is lacking is the political courage of the nation’s policymakers
to convince the American public of the sound basis underlying the replacement of the
mortgage interest deduction with an appropriately formulated tax credit.
II. The Evolution of the Mortgage Interest Deduction
The mortgage interest deduction did not technically exist until 1986.1
But this
was not the first time homeowners were able to deduct mortgage interest from their
taxable income. While the Revenue Act of 1913 (“1913 Revenue Act” or the “Act”) did
not technically include any mention of a deduction for interest paid on an owner-
occupied residence, it did provide for a general offset for “all interest paid within the year
by a taxable person on indebtedness.”2
The Act permitted an offset to tax owed for the
costs associated with producing taxable income and paid lip service to the principle of a
“net income tax.” Nonetheless, it violated this principle by excluding imputed rent from
owner-occupied housing from taxable income, while allowing offsets for property taxes
and interest on that non-taxable form of income.3
The historical record is unclear why Congress allowed a deduction for consumer
interest under the 1913 Revenue Act. Commentators have observed that the deductibility
1
See I.R.C. § 163(h)(3) (1986).
2
Revenue Act of 1913, Publ. L. No. 63-16, 38 Stat. 114, 167.
3
See Dennis J. Ventry, Jr., The Accidental Deduction: A History and Critique of the Tax
Subsidy for Mortgage Interest, 73 Law & Contemp. Probs. 233, 236 (2010) [hereinafter The
Accidental Deduction].

3. 3
of consumer interest “may have been less a matter of principle than a reflection of the
practical difficulty of distinguishing personal from profit-seeking interest.”4
In 1913, under the nascent federal income tax, only a fraction of the interest on
the home mortgage debt was deductible. High exemption levels created tax-free
thresholds of $68,000 and $89,000 stated, respectively – in 2014 dollars – for singles and
married couples.5
Generous zero-bracket levels exempted 98% of all households, such
that taxpayers filed 358,000 returns even though there were 1.7 mortgaged homeowners.6
Except during World War I when Congress lowered the thresholds for personal
exemptions, the number of mortgaged primary residences exceeded the number of
taxpayers. In 1920, with the personal exemption at a wartime low, 7.26 million returns
were filed for a population with 2.7 million mortgaged homeowners.7
In 1930 with
exemption levels raised again, there were barely 3.7 million returns filed when 4.7
million out of 10.56 million homeowners held mortgage debt.8
Moreover between 1913
and 1930, average nonfarm worker earnings never exceeded the tax-free threshold for
married couples.9
Thus, during this time, untold numbers of workers purchased a home
4
Stanley A. Koppelman, Personal Deductions Under an Ideal Income Tax, 43 Tax L. Rev. 679,
713 (1987).
5
See The Accidental Deduction, supra note 3, at 239-240.
6
See Scott Hollenbeck & Maureen Keenan Kahr, Ninety Years of Individual Income and Tax
Statistics, 1916-2005, in IRS Statistics of Income Bulletin 144 (Winter 2008),
http://www.irs.gov/pub/irs-soi/16-05intax.pdf. See also The Accidental Deduction, supra note 3,
at 243 n.65.
7
See Hollenbeck and Kahr, supra note 6; see also The Accidental Deduction, supra note 3, at 243
n.65.
8
See Hollenbeck and Kahr, supra note 6; see also The Accidental Deduction, supra note 3, at 243
n.65.

4. 4
with mortgage debt but derived no tax benefit from it. The interest deduction – including
mortgage interest – was not for average taxpayers or even middle-to-upper-middle-
income taxpayers. It was limited to wealthy-enough taxpayers to be subject to the class-
based income tax at the time – and to worse effect – the group of taxpayers whose
decision about whether or not to own a home most likely had nothing to do with a tax
deduction.
In the 1940s, Congress adopted the standard deduction to simplify the tax law and
save taxpayers the trouble of accounting for miscellaneous deductible expenses.10
The
new standard deduction limited the number of taxpayers that claimed the itemized
deduction for mortgage interest. As late as the 1950s, less than 20% of taxpayers, 10.3
million, itemized their deductions,11
yet the number of itemizers exceeded the number of
mortgaged owner-occupied homes, 7.83 million.12
The number of itemizers increased to
29% in 1955. By 1960, the number stood at 39.5%.13
Yet, despite the rapid growth in
the number of mortgaged, taxpaying homeowners, policymakers were still not thinking of
the mortgage interest deduction as an integral part of national housing policy.
9
See Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970, at
164 (1975), available at http://www2.census.gov/prod2/statcomp/documents/CT1970p2-01.pdf.
10
Individual Income Tax Act of 1994, Pub. L. No. 78-315, § 9(a), 58 Stat. 231, 236. See also
John R. Books, Doing Too Much: The Standard Deduction and the Conflict Between
Progressivity and Implication, 2 Colum. J. Tax L. 203, 210 (2011).
11
See IRS, SOI Bulletin, Historical Table 7: Standard, Itemized and Total Deductions Reported
on Individual Income Tax Returns, 1950-2012 (2014), http://www2.census.gov/prod2/statcomp/
documents/CT1970p2-01.pdf.
12
See Hollenbeck and Kahr, supra note 6; see also The Accidental Deduction, supra note 3, at
243 n.65.
13
Calculated from SOI Bulletin, supra note 11.

5. 5
Rates of home ownership were low – less than 50% – until after World War II.14
Still Congress took no action to enact a taxation vehicle to promote homeownership.
Stanley Surrey, a notable Treasury official and law professor, wrote that the “origins” of
the mortgage interest deduction (“MID”) were “cloudy” and only later became “defended
on incentive grounds.”15
It is clear from the time of the enactment of the 1913 Revenue
Act through the 1950s that Congress did not see the consumer interest deduction as an
incentive for homeownership.
In the 1960s, a long-term strategy for tax reform began to emerge. It included not
only raising the standard deduction to extend tax savings to non-itemizing taxpayers16
but, most relevant to this discussion, advocated an accounting of “tax expenditures” on an
annual basis so that policymakers could evaluate them.17
Such an evaluation,
policymakers reasoned, would help them identify inefficient and “upside down”
subsidies.
The policy reforms appeared to be working. By the 1970s, Congress had
sufficiently raised the standard deduction to effectively remove millions of MID
14
See Leo Grebler, David M. Blank & Louis Winnick, Capital Formation in Residential Real
Estate: Trends and Prospects 467 (1956). See also U.S. Census Bureau, Historical Census of
Housing Tables: 1900 - 2000 (last revised October 31, 2011), https://www.census.gov/hhes/
www/housing/census/historic/owner.html.
15
Stanley S. Surrey, Pathways to Tax Reform: The Concept of Tax Expenditures 127 (1973).
16
See The Accidental Deduction, supra note 3, at 261; see also Tax Reform Act of 1969:
Hearings on H.R. 13270 Before the S. Comm. on Finance, 91st
Cong. 669, 672 (1969).
17
Stanley S. Surrey, The United States Income Tax System—The Need for a Full Accounting, in
Tax Policy and Tax Reform: 1961-1969 575-76 (William F. Hellmuth & Oliver Oldman eds.
1973).

6. 6
beneficiaries.18
By the decade’s end, only slightly more than one-quarter of all taxpayers
benefitted from the MID, which by this point, had become more regressive and more
expensive.19
Even though reformers pointed out the subsidy’s unfairness and expense,
the MID grew and even accelerated as inflation eroded the value of tax-free thresholds
creating new recipients of itemized deductions.20
In 1970, taxpayers used the MID to deduct 3.78% of their adjusted gross
income.21
In 1975 and 1980, this percentage increased to 4.1% and 5.65%,
respectively.22
By 1985, the interest deduction stated as a percentage of taxpayer gross
income had swelled to 7.81% and threatened to erode the tax base.23
Yet the MID seemed immune from reform – until 1986. The Reagan
Administration wanted to improve the slumping economy and reduce an exploding
deficit. The Treasury Department was given the mandate to root out revenue.
Everything appeared to be on the table.24
Everything, that is, until President Reagan
18
See IRS, SOI Bulletin, Historical Table 7: Standard, Itemized, and Total Deductions Reported
on Individual Income Tax Returns, 1950-2012 (2014), http://www.irs.gov/uac/SOI-Tax-Stats-
Historical-Table-7.
19
Joan C. Williams, It’s High Time to Get Homeowners’ Deductions Under Control, 12 Tax
Notes 963, 968 (1981).
20
Id. at 964.
21
Selected Historical Data: Individual Income Tax Returns: Select Income and Tax Items for
Selected Year, 1970-1980, 9 IRS, Statistics of Income Bulletin 4, 137 (Spring 1990),
http://www.irs.gov/pub/irs-soi/90rpsprbul.pdf [hereinafter Statistics of Income Bulletin, 1970-
1980].
22
Id.
23
Id.
24
Congressional Budget Office, Reducing the Deficit: Spending and Revenue Options 7, 284
(1983), http://www.cbo.gov/sites/default/files/03-10-reducingthedeficit.pdf.

7. 7
almost immediately immunized the MID and interjected politics into tax reform.25
The
Tax Reform Act of 1986 accomplished a great deal but, with the MID cordoned off, the
restructured Tax Code only tangentially modified existing housing tax policies. And, the
modifications were short-lived, because the following year Congress enacted a deduction
for home equity loans.26
The next thirty years did little to justify the continuation of the MID. New
homeowners were taking out increasingly high loan-to-value first mortgages and existing
homeowners increasingly borrowing more in home equity debt.27
This would contribute
to the collapse of housing and financial markets in 2007. The die, however, had been
cast as far back as the mid-1980s when President Reagan capitulated to the real estate
lobby.
II. The Tax Reform Act of 1986: The Mother of All Tax Subsidies
The Tax Reform Act of 1986 (“TRA86”) made an “indelible mark” on national
housing policy.28
The MID was preserved and created in a new provision to deal with
“qualified residence interest.”29
Internal Revenue Code § 163(h)(3) permitted an
itemized deduction for interest on an indebtedness to acquire or secure a primary or
secondary residence if the residence secured the underlying indebtedness. The TRA86
25
Lou Cannon, Reagan to Keep Home Mortgage Tax Deduction, Wash. Post, May 11, 1984, at
Fl. (announcement delivered personally by President Reagan to the National Association of
Realtors).
26
Omnibus Budget Reconciliation Act of 1987, Pub. L. No. 100-203, 101 Stat. 1330, 1330-385.
27
The Panel Study of Income Dynamics – PSID – is the longest running longitudinal household
survey in the world, Panel Study of Income Dynamics, https://simba.isr.umich.edu/data/data.aspx
(last visited April 4, 2015).
28
The Accidental Deduction, supra note 3, at 274.
29
Pub. L. No. 99-514, 100 Stat. 2085 (1986), at 2246-48.

8. 8
preserved the deduction for property taxes (but did, at the time, repeal the deduction for
state and local sales taxes).30
While the TRA86 enacted a new provision inserting a 2%
adjusted-gross-income floor on miscellaneous deductions, it exempted home mortgage
interest and property taxes from the deduction limitation.31
The victories of the housing industry were accompanied by some setbacks under
the TRA86. The value of the restructured MID was eroded by the combined effect of
reduced marginal rates, a higher standard deduction, and the repeal of the consumer
interest deduction. These changes alone reduced the federal expenditure for housing by
more than 30% and, for households with incomes below $42,500 (about $90,000 in 2014
dollars) rendered the MID irrelevant.32
One of the most straightforward effects of
TRA86 was to stem the erosion of the tax base.33
As the elimination of the deduction for
consumer credit interest was phased in, the amount of adjusted gross income lost to the
interest deduction dropped, stabilizing near 5% (see Table 1 below).
Table 1: Amount of Interest Deduction as a Percent of Adjusted Gross
Income34
1970 1975 1980 1985 1990 1995 2000
3.78% 4.1% 5.65% 7.81% 6.12% 5.13% 5.07%
30
Id. at 2116.
31
Id. at 2113-16.
32
James R. Follain & David C. Ling, The Federal Tax Subsidy to Housing and Reduced Value of
Mortgage Interest Deduction, 44 Nat’l Tax J. 147, 157 (1991).
33
Joseph A. Pechman, Tax Reform: Theory and Practice, 1 J. Econ. Persp. 11, 16-17 (1987).
34
See Statistics of Income Bulletin, supra note 21, Spring 1990, 1996, and 2006.

9. 9
At the same time, the TRA86 increased the relative tax advantage of
homeownership over other forms of capital investment35
and further distorted the choice
between debt and equity by making housing tax subsidies considerably more dependent
on loan-to-value ratios.36
The Obama Administration's fiscal year 2014 budget, released
in April 2013, estimated that the MID would reduce revenues by $93 billion in 2013 and
$640 billion from 2014 to 2018.37
The deduction was listed as the second largest tax
expenditure in the 2014 budget and as the third largest in the Joint Tax Committee's
August 2014 estimates.38
This paper asserts that the MID, as much as it ever has in its
100 year history, is in need of reform. It is an inefficient and inequitable policy vehicle
that has “almost no effect on the homeownership rate.”39
III. Should Public Policy Encourage Home Ownership?
Before reform options for the MID are addressed, the issue whether the role of
government has any place in encouraging home ownership must be considered. The
35
“The economy-wide tax rate on housing investment is close to zero, compared with a tax rate
of approximately 22 percent on business investment.” The President’s Advisory Panel on Federal
Tax Reform, Simple, Fair and Pro-Growth: Proposals to Fix America’s Tax System 73 (2005)
[hereinafter Tax Reform Panel 2005].
36
The Accidental Deduction, supra note 3, at 275.
37
See Fiscal Year 2014 Budget of the U.S. Government, Office of Management and Budget 197
(April 10, 2013).
38
See Estimate of Federal Tax Expenditures for Fiscal years 2014 -2018, House Committee on
Ways and Means and the Senate Committee on Finance and the Joint Committee on Taxation,
JCX-97-14, at p. 25 (August 5, 2014).
39
Edward L. Glaeser & Jesse M. Shapiro, The Benefits of the Home Mortgage Interest Deduction
3 (Nat’l Bureau of Econ. Research, Working Paper No. 9284, 2002) [hereinafter Benefits of
MID]; see also William G. Gale, Jonathan Gruber, and Seth Stephens-Davidowitz, Encouraging
Homeownership Through the Tax Code, 115 Tax Notes 1171, 1179 (2007) [hereinafter
Encouraging Homeownership], http://www.brookingsedu/ research/articles/2007/0618housing-
gale.

10. 10
mere fact that many people might want to own a home is not a sufficient reason to
subsidize home purchases. Economic theory, however, suggests that subsidies, which
encourage home ownership, can be justified if they provide spillover benefits to society at
large.40
There are many such spillover benefits. Homeowners tend to be more active
citizens, contributing to their communities with a longer-term vision and interest.41
Homeowners may tend to take better care of their property than renters. Additionally,
increase rates of home ownership may reduce crime; and, if greater geographic stability is
assumed due to home ownership, someone committing a crime may be more likely to be
recognized than in a more transient renter community.42
“Any of these behaviors, if
sufficiently prevalent, could plausibly raise property values in the community at large and
therefore provide a benefit to people other than the home owner."43
Empirical evidence exists to support these claims. Statistical economic analysis,
when accounting for observable characteristics like income, marital status, and age,
indicates that home ownership is positively correlated with a higher likelihood of
belonging to a cohesive social group and maintaining one's home; having more political
knowledge; engaging in higher political activity; and, living in areas with lower crime
rates.44
40
Encouraging Homeownership, supra note 39, at p. 1177.
41
Id.
42
Id.
43
Id.
44
See generally Denise DePasquale, & Edward L. Glaeser, Incentives and Social Capital : Are
Homeowners Better Citizens, 45 J. of Urb,. Econ. 354-384 (March 1999); Benefits of MID,
supra note 39, at 1-60.

11. 11
These correlations, however, do not establish that home ownership indeed causes
the desired behaviors.45
A full examination of the positive behavioral effects of home
ownership versus renting is beyond the scope of this paper. Suffice it to say, that there
are compelling arguments in theory for the external benefits of home ownership. Little
evidence exists to support these arguments, but that does not mean that the arguments are
wrong.46
Assuming that sufficient policy justifications exist to warrant incentivizing
homeownership through the provision of tax subsidies, much empirical evidence exists
that the MID is falling far short of its professed goal. As the following discussion
demonstrates, the MID, instead of encouraging homeownership, may be spurring
homeowner behaviors that are characterized by risky loan-to-value ratios and ever
increasing debt burdens.
IV. Stated Policy of the MID Is to Encourage Home Ownership: But Has It?
A. Trends in Mortgage Debt Coincide with the Preservation of the MID
Under the TRA86
The benefits of the tax incentives related to housing are not shared equally among
taxpayers.47
The MID is a sizable tax subsidy – the third-largest deduction in the Code
(behind exclusion for employer contributions for medical insurance premiums and the
exclusion of net imputed income) – that in 2013 decreased federal revenues by $69
45
Encouraging Homeownership, supra note 39, at p. 1177.
46
Id.
47
See Tax Reform Panel 2005, supra note 35, at 73.

12. 12
billion.48
According to the Joint Committee on Taxation, more than 77% of the estimated
tax expenditure resulting from the MID went to 12% of taxpayers with cash incomes of
$100,000 or more.49
For the last 50 years, mortgage debt relative to the Gross National Product
(“GDP”) reflected alternating periods of stability and growth, with a marked decline
appearing only in the years following the mortgage-banking crisis of 2008.50
Throughout the 1960s and 1970s, mortgage debt, stated as a percentage of GDP, held
steady at about 30%.51
The ratio of mortgage debt to GDP increased modestly to just
below 35% in the late 1970s and early 1980s.52
The ratio grew noticeably, beginning in
1984, and continuing the rest of the 1980s and into the 1990s until it plateaued at just
above 45%.53
There was additional stability throughout the 1990s, which was followed
with greatly exaggerated growth in the early 2000s.54
One thing is clear: mortgage borrowing and the tax advantage associated with the
MID were “tightly linked” in the American consciousness at the time of the TRA86.55
48
See 2011 Estimated Data Line Counts Individual Income Tax Returns, Statistics of Income
Division of the IRS, http://www.irs.gov/pub/irs-soi/10inlinecount.pdf.
49
Tax Reform Panel 2005, supra note 35, at p. 72.
50
Council of Economic Advisers, Economic Report of the President 408 (2012),
http://www.whitehouse.gov/sites/default/files/microsites/ERP-2012_complete.pdf. [hereinafter
Economic Report of the President].
51
Id.
52
Id.
53
Id.
54
Id.
55
David Frederick, Reconciling Intentions with Outcomes: A Critical Examination of the
Mortgage Interest Deduction, 28 Akron Tax J. 41, 67 (2003).

13. 13
The data shows that 1984 was a turning point for the start of dramatic growth in the
mortgage market.56
A comparison shows the depth of this expansion. From 1977 to
1984, the ratio of mortgage debt to GDP increased a total of 2.87% percentage points –
or .41% per year.57
On the other hand, from 1984 to 1991, the ratio increased a total of
12.25 percentage points at an average growth rate of 1.75% per year.58
This data shows
a correlation between TRA86 and the mortgage market. As noted earlier, demonstrating
a correlation does not establish causation. Nonetheless, the data is sufficient to observe
that President Reagan's promise to preserve the MID coincides with a substantial increase
in the consumption of mortgage debt stated as a percentage of GDP.
B. How Is Mortgage Debt Divided Among Homeowners?
The pattern of division of mortgage debt to GDP differs from the pattern of home
ownership during the same period. With mortgage debt increasing substantially as a
percentage of GDP from 1987 through the 2000s, one would expect that rates of home
ownership would increase proportionately. This, however, has not been the case.
The proportion of homeowners having at least one mortgage held steady
throughout the 1980s.59
This proportion made a substantial dip in the early 1990s. It
then climbed sharply up words in the late 1990s and early 2000s. The growth in
mortgage debt as a percentage of GDP was not matched by an increase in the number of
people holding mortgage debt. Instead, the percentages of Americans with home
56
Economic Report of the President, supra note 50, at 408.
57
Id.
58
Id.
59
Panel Study of Income Dynamics, supra note 27.

14. 14
mortgages held steady at about 63.49% in 1985 in 64.66% in 1993.60
Whatever effect
TRA86 had on mortgage debt, it did not cause a rush of new entrants into the home
mortgage market.
C. Who Currently Benefits from the MID
The vast majority of the dollar benefits of the MID are received by high-dollar
taxpayers with little-to-few dollars going to low-income households purchasing a home
(see Table 2 below).61
60
Id.
61
Jason Fichtner and Jacob Felman, Working Paper, Reforming the Mortgage Interest Deduction,
Mercatus Center, George Mason University, No. 14-17, at p. 7 (June 2014) (authors’ calculations,
using data from the Statistics of Income Division of the IRS, table 1.1, “All Returns: Selected
Income and Tax items, by Size and Accumulated Size of Adjusted Gross Income, Tax Year
2010,” July 2012, htt://www.ir.gov/file_source?PUP/ taxstats/indtaxstats/10inllsi.xlx) [hereinafter
Working Paper Reforming the MID].

15. 15
On the other hand, wealthier individuals carry more mortgage debt and enjoy higher rates
of home ownership (see Table 3 below).62
Income Range All Households
All 68.3%
<$5,000 48.9
$5,000-$9,999 39.4
$10,000-$14,999 46.7
$15,000-$19,999 47.0
$20,000-$24,999 49.5
$25,000-$29,999 43.5
$30,000-$34,999 54.2
$35,000-$39,999 55.9
$40,000-$49,999 61.2
$50,000-$59,999 69.5
$60,000-$69,999 75.1
$70,000-$79,999 79.0
$80,000-$99,999 85.0
$100,000-$119,999 88.7
$119,999 92.1
Low and middle-income taxpayers are less likely to use the MID because, in 2014, the
standard deduction for an individual was $6,200 ($12,400 if married, filing jointly).63
Unless a taxpayer’s MID – in addition to their other itemized deductions including
deductions in amounts necessary to clear adjusted-gross-income thresholds (so-called
“Pease haircuts”) – are in excess of the amount that could otherwise be deducted under
the standard deduction, a taxpayer will not elect to itemize.64
The deduction’s value depends on a household’s marginal tax rate, so households
in higher tax brackets benefit more. Consider this example: An investment banker
making $675,000 who has a $1 million mortgage and pays $40,000 in mortgage interest
62
Working Paper Reforming the MID, supra note 36, at 8.
63
26 U.S.C.A. § 63(b) (2011), Table 13.
64
See Benefits of MID, supra note 39, at pp. 7-8.

16. 16
each year will receive a housing subsidy of about $14,000 annually from the mortgage
interest deduction. The banker pays about 65 cents per dollar of mortgage interest, and
the taxpayers pick up the remaining 35 cents. By contrast, a schoolteacher making
$45,000 and with a $250,000 mortgage paying $10,000 a year in mortgage interest on a
more modest home receives a housing subsidy worth $1,500 annually. The family pays
85 cents of every dollar of mortgage interest and taxpayers pick up the remaining 15
cents. The banker’s subsidy is not only larger than the teacher’s in dollar terms but also
represents a greater share of the banker’s mortgage interest expense.
The benefits of the MID among these higher income taxpayers are compounded
by the deductibility of home mortgage interest at the state income tax level. Of the 41
states with an individual income tax, 31 of those states directly or indirectly follow the
federal government’s policy of permitting deductions for home mortgage interest
expense.65
Taxpayers further compound the benefits with larger mortgages in states with
the highest tax rates. For example, in California where income tax rates and property
values are high relative to other states, more affluent taxpayers benefit – again
disproportionately – on both the federal and state levels from the MID. Whatever
benefits the MID may accomplish at the federal level, states receive far less benefit in
encouraging home ownership because of lower state income tax rates.66
The professed goal of the MID (as well as other housing related deductions and
credits) is to increase home ownership. Yet, the empirical evidence suggests that the
65
Donald Morris and Jing Wang, How and Why States Use the Home Mortgage Interest
Deduction, Tax Analysts Special Report, June 4, 2012, at p. 698-99,
http://taxprof.typepad.com/files/64st0697.pdf.
66
Id. at 701-702.

17. 17
MID is primarily utilized by higher-income earners. Table 3 above demonstrated that
homeownership is distinctly higher for households with greater than median incomes,
suggesting that income – not the MID – is a significant determinant of home ownership.
A report prepared for the National Housing Institute in 1997 showed that 45% of the
aggregate benefit of the MID went to just 9.8% of taxpayers with incomes of over
$100,000.67
According to the Joint Committee on Taxation, 12% of taxpayers who had
cash income of $100,000 received more than 77% of the estimated tax expenditure for
the MID in 2004.68
Even if the disparity among the beneficiaries of the MID could be ignored, it is
unclear to what extent the subsidy provided by the MID actually promotes
homeownership. According to 2005 Census Bureau statistics, America boasted 123
million homes; yet, the rate of home ownership was 69%. 69
Other countries provide a
MID. A comparison of these countries with the United States also suggests an
inconclusive relationship between the MID and home ownership. The United Kingdom,
for example, phased out its MID between 1975 and 2000, still home ownership rose from
53% in 1974 to 68% in 2001.70
Several countries – including Canada and Australia –
67
Richard K. Green and Andrew Reschovsky, The Design of a Mortgage Interest Tax Credit,
Final Report submitted to the Nation Housing Institute, September 1997.
68
Tax Reform Panel of 2005, supra note 35, at 72 (source: Department of the Treasury, Office of
Tax Analysis).
69
Id.
70
Will Fischer and Chye-Ching Huang, Mortgage Interest Deduction is Ripe for Reform:
Conversion to Tax Credit Could Raise Revenue and Make the Subsidy More Effective and Fairer,
Center on Budget and Policy Priorities, June, 25, 2013, http://www.cbpp.org/files/4-4-
13hous.pdf.

18. 18
provide no MID, yet have higher rates of home ownership than the United States.71
The
United States has the world's most generous tax code provision for owner-occupied
housing,72
despite the lack of any clear statistical relationship between the tax subsidy
and home ownership rates.
V. Eliminating the MID in Favor of Tax-Credit Policies Designed to Encourage
Greater Infra-Marginal Household Home Ownership
Proposals for reforming the tax expenditure related to housing tax-policy are not
new. They predate the express inclusion of the MID in the TRA86.
In 1957, Congressman Wilbur Mills, then chairman of the House Committee on
Ways and Means, oversaw hearings focused on reducing tax rates without sacrificing
revenues.73
Among the matters debated in these hearings was whether sound tax policy
could exclude imputed rental income and yet allow a deduction for mortgage interest.74
The benefits of omitting imputed rental income from taxable income accrued
disproportionately to taxpayers with large homes. "To the extent that the value of the
home and the taxpayer's income are positively correlated," economist Melvin White
argued, "the omission of the imputed rental is doubly deprogressive."75
71
Working Paper Reforming the MID, supra note 61, at 9.
72
See David Ling and Gary A. McGill, The Variation of Homeowner Tax Preferences by
Income, Age and Leverage, 35 Real Est. Econ. 505-39 (2007).
73
See Samuel. H. Hellenbrand, Itemized Deductions for Personal Expenses and Standard
Deductions for Personal Expenses and Standard Deductions in the Income Tax Law, in House
Comm. On Ways & Means, 86th
Cong., Tax Revision Compendium: Compendium of Papers on
Broadening the Tax Base 375, 387-88 (Comm. Print 1959) [hereinafter Tax Revision
Compendium].
74
See Melvin I. White, Consistent Treatment of Items Excluded and Omitted from the Individual
Income Tax Base, in Tax Revision Compendium, supra note 73, at 317, 323.
75
Id.

19. 19
The criticisms the reformers levied are echoed to this day. The deduction was
logical only as an allowance from gross rent.76
Although permitted in a net income tax
system, the expenditure associated with the MID was "not only personal in nature,
completely foreign to business activities, but . . . unrelated to an income-tax-producing
asset.”77
Moreover, it "discriminated against the tenant"78
and provided "a considerable
subsidy to property owners, especially those who are mortgagors."79
Not unlike today, at the time these criticisms were levied, only a fraction of
homeowners received the subsidy from the MID because most taxpayers claimed the
standard deduction.80
While reformers recognized that promoting homeownership was a
worthy goal, bestowing tax subsidies on wealthy debtors was inefficient and inequitable.
If Congress desired to encourage home ownership, it should eliminate using the
"concealed, non-explicit technique" of taxation and instead provide direct subsidies.81
Against the backdrop of such an indictment, it is hard to fathom that the MID not only
has survived but has continued to enjoy widespread, popular support since its retention in
the TRA86. Nonetheless, the outcry for reform is steady and continues to this day.
A. Proposals to Replace the MID with Various Types of Mortgage Interest
Tax Credits
76
White, supra note 74, at 358.
77
Trammel, Personal Deductions and the Federal Income Tax, in Tax Revision Compendium,
supra note 73, at 468.
78
White, supra note 74, at 358.
79
Stanley S. Surrey, The Federal Income Tax Base for Individuals, 58 Colum. L. Rev. 815, 826
(1958)
80
White, supra note 74, at 365.
81
Id. at 297.

20. 20
A number of proposals would scale back the deduction. Others would limit the
amount of itemized deductions even further under the Code. For example, the Obama
administration has proposed capping the subsidy for mortgage interest and other itemized
deductions at 28% on the dollar.82
This would trim the deduction for higher income
households but would do little to address its flaws: namely, the lack of benefit provided
by the MID to middle- and lower-income families who take the standard deduction.
In its biennial report concerning deficit reduction, the Congressional Budget
Office (“CBO”) recommended a phase out of the MID without a home ownership
subsidy to replace it.83
The Brookings Institute and its economists (generally considered
centrists or liberal leaning) proposed replacing the MID with a narrowly targeted, one-
time-credit for first time homebuyers.84
These proposals would increase tax revenues and
eliminate the incentive to overinvest in housing and over-encumber it with debt. But,
problematically, they would eliminate substantial tax benefits for a large number of
middle-income taxpayers and be very difficult to enact politically.
Other more recent proposals have focused on another approach. These proposals
would: (1) convert the MID to a credit for mortgage interest; (2) reduce the amount of
interest expense that it covers; and, (3) make second homes ineligible for the deduction.
These proposals have been included in various bipartisan plans, such as those proposed
by Erskine Bowles and Alan Simpson (“Bowles-Simpson Plan”), co-chairs of President
82
Nick Timiraos, President Obama Weighs In on Mortgage-Interest Deduction, Wall Street
Journal, December 4, 2012, http://blogs.wsj.com/developments/2012/12/04/ president-obama-
weighs-in-on-mortgage-interest-deduction.
83
Congressional Budget Office, Reducing the Deficit: Spending and Revenue Options 146
(March 2011), http://www.cbo.gov/sites/default/files/03-10-reducingthedeficit.pdf.
84
Encouraging Homeownership, supra note 39, at 1182.

21. 21
Obama’s Fiscal Commission;85
the debt reduction panel headed by former CBO and
OMB director Alice Rivlin and former Sen. Pete Domenici (“Rivlin Domenici
Proposal”);86
and, President Bush's tax reform panel of 2005 (“Bush 2005 Tax Panel”).87
A significant paper by Alan Viard of the American Enterprise Institute88
(“Viard AEI
Proposal”) in 2013 proposed similar features of reform.89
Notably, Representative Keith
Ellison (D-MN) introduced legislation in March 2013 (“Ellison Legislation”) that would
modify tax-housing policy along the same lines, though it would retain the subsidy for
second home mortgage interest.90
Table 4 on the following page compares and summarizes various proposals to
reform the MID with a tax credit:
85
National Commission on Fiscal Responsibility and Reform, The Moment of Truth, December
2010, http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/
TheMomentofTruth12_1_2010.pdf.
86
Bipartisan Policy Center Debt Reduction Task Force, Restoring America’s Future, November
2010, http://bipartisanpolicy.org/ library/restoring-americas-future/ [hereinafter Restoring
America’s Future].
87
See Tax Reform Panel 2005, supra note 35, at 73.
88
The American Enterprise Institute is considered the “right-leaning” counterpart of the
Brookings Institute.
89
Alan Viard, Replacing the Home Mortgage Interest Deduction, Fifteen Ways to Rethink the
Federal Budget, The Hamilton Project, February 2013, http://www.brookings.edu/research/papers
2013/02 replace-mortgage- interest-deduction [hereinafter Fifteen Ways to Rethink Budget].
90
Common Sense Housing Investment Act of 2013, H.R. 1213, introduced March 15, 2013.

22. 22
Table 4
Comparison of Mortgage Interest Credit Proposals
Proposal
Limit on Interest
Covered
Credit
Percentage
Credit for
Second
Homes?
Type of Credit
Bush Tax
Reform Panel
Interest on
mortgages up to
125 percent of
median price in
area
15 percent No Non-
Refundable
Owner-Claimed
Rivlin-Domenici
Commission
$25,000 15 percent No Lender-
Claimed
Bowles-Simpson
Illustrative Plan
Interest on
mortgages up to
$500,000
12 percent No Non-
Refundable
Owner-Claimed
Ellison Bill Interest on
mortgages up to
$500,000
15 percent Yes Non-
Refundable
Owner-Claimed
Viard AEI
Proposal
Interest on
mortgages up to
$300,000
15 percent No Refundable
Owner-Claimed
Credit-based proposals, on balance, are superior to the MID. First, a credit, unlike
a deduction, benefits homeowners regardless of whether they itemize or take the standard
deduction. Second, the credit would be a fixed-percentage of the taxpayer’s mortgage
interest and would not vary based upon the household’s marginal tax rates. This would
reduce the tax benefits for mortgagors in the higher tax brackets while expanding them
for households in the lower brackets.
Additionally, reducing the maximum amount of interest that the credit would
cover would reduce the subsidies for better-off households; however, depending on the
where the maximum-interest-expense cap is set, the credit would not affect most
homeowners. The Bowles-Simpson Plan would cap the credit on interest on mortgage

23. 23
balances up to $500,000, half of the current maximum mortgage amount permitted.91
A
2009 American Housing Survey indicated that 95% of homeowners with mortgages had
balances below $300,000.92
Table 5 below illustrates the more equal distribution of the mortgage subsidy that
would result if the MID was replaced with a 15% non-refundable tax credit.
91
Moment of Truth, supra note 85, at 31.
92
United State Census Bureau, American Housing Survey, National Summary Tables AHS-2013,
http://www.census.gov/programs-surveys/ahs/data/2013/national-summary-report-and-tables---
ahs-2013.html.

24. 24
B. Effects of Replacing the MID with Refundable/Non-Refundable Tax
Credits
While estimates vary about the amount of revenue that could be raised by a MID-
to-tax-credit reform, the Urban-Brookings Tax Policy Center (liberal leaning) concluded
that, under current law, the replacement of the MID with a 15% non-refundable credit
would raise, conservatively, about $213 billion between fiscal years 2014 and 2034, or
$10.6 billion per year.93
Further, a 15% credit covering mortgages up to $500,000 that
was nonrefundable (available only to households with federal income tax liability) would
reduce annual subsidies by $24 billion or 42% among homeowners with incomes above
$100,000.94
About two-thirds of that $24 billion in savings would come from
homeowners with incomes over $200,000.95
The changes contained in these credit-based
proposals would trim benefits significantly for higher-income households.96
93
Amanda Eng, Harvey Galper, Georgia Ivsin, and Eric Toder, Options to Reform the Deduction
for Home Mortgage Interest, Urban-Brookings Tax Policy Center, March 18,2013,
http://www.taxpolicycenter.org/publications/url.cfm?ID=412768 [hereinafter Options to Reform
the MID Deduction].
94
See id. at 4. Calculating revenue savings based on scenarios where the MID is replaced by a
fixed percentage interest subsidy is a complicated endeavor. In these scenarios, households are
assumed to reduce their holdings of taxable financial wealth only to the extent the marginal tax
rate they would face on income from those assets is higher than the percentage-subsidy rate. For
example, if a taxpayer is in the 33% bracket and the MID is replaced with a 20% interest credit,
the taxpayer will still reduce her interest income (taxed at 33%) and interest deduction (deduction
at 20%) but no longer reduce her capital gains and dividends (tax at 20%).
95
Id.
96
“Comparing the four options for replacing the mortgage interest deduction with an interest
credit, tax units in the bottom four quintiles benefit under all four options. Taxpayers in the
bottom three quintiles benefit the most under the 100 percent capped refundable credit, while
those in the fourth quintile gain the most under the 100 percent capped non-refundable credit.
Taxpayers in the top fifth of the income distribution lose under all four options.” Margery Austin
Turner, Eric Toder, Rolf Pendall, & Claudia Sharygin, How Would Reforming the Mortgage
Interest Deduction Affect the Housing Market?, Unban Institute, at p. 10 (March 2013),
http://www.urban.org/UploadedPDF/412776-How-Would-Reforming-the-Mortage-Interest-
Deduction-Affet-the-Housng-Market. Pdf [hereinafter Effects on the Housing Market].

25. 25
Homeowners down the income scale would also see modest increases in the benefit from
these changes.97
An additional benefit of a mortgage interest tax credit is that it would help 16
million more homeowners than the existing deduction and increase subsidies by $7
billion (30%) overall among homeowners with incomes under $100,000.98
While
replacing the MID with a 15% credit raises taxes by an average of $105 per tax return,
taxes would decline for 20% of tax units by an average of $452.99
Thirteen percent of tax
units would experience an increase of $1,458. The cumulative effect of the proposed
credit would do as much or more than retaining the MID for households that have
difficulty affording a home or who are on the margin between owning and renting.100
A recommendation by the Rivlin-Domenici Commission was that the lender claim
the credit and pass the benefit along to the homeowner in the form of a lower interest
rate.101
This would alleviate the homeowner of the burden of claiming the MID or the
other proposed forms of mortgage-interest credits on the taxpayer’s return.102
Because
the homeowner could elect to receive the credit via a reduced interest rate, the credit
could be claimed even in situations where the homeowner had no tax liability. This
approach would contrast sharply with that of the Bowles-Simpson Plan, Bush 2003 Tax
97
Options to Reform the MID Deduction, supra note 93, at pp. 3-4.
98
Id.
99
Id. at p. 3.
100
Id.
101
See Restoring America’s Future, supra note 86, at 36.
102
A variation of this proposal would be to allow the homeowner to elect, at the time the
mortgage is taken out, to receive the benefit of the credit in the form of a lower interest rate
provided by the lender or for the homeowner to claim the credit directly.

26. 26
Panel, and the Ellison Legislation, which called for nonrefundable, owner-claimed
refunds that would only be available with households with tax liability.
The Urban-Brookings Tax Policy Center estimated that 10 million more
homeowners (a large percentage of those with incomes below $50,000) would benefit
from a lender claimed credit than from a non-refundable owner-claimed credit.103
Because a lender-based credit would reach more homeowners, it would subsequently
raise less tax revenue than a nonrefundable owner-claimed credit; or, alternatively, the
credit could be set at a lower percentage to raise more revenue.
C. Significant Negative Effects on the Housing Markets Would Be Unlikely
Due to MID-to-Tax-Credit Reform
Some have expressed concern that the elimination of the MID would dramatically
and negatively impact home prices because fewer taxpayers may be incentivized to
purchase a home. Such an impact is unlikely to occur because the credit would help
more households than the MID. Moreover, the credit would replace much of the total
dollar value of the deduction. according to one study, about four-fifths of the current
dollar-value of the deduction would be replaced with a 15% nonrefundable credit
covering interest on mortgages up to $500,000.104
Some past research has found substantial effects on home prices should the MID
be eliminated. For example, a widely-cited paper written in 1996 estimated eliminating
the MID and property tax deductions in their entirety would reduce housing prices in the
103
See Options to Reform the MID Deduction, supra note 81, at p. 4.
104
See Effects on the Housing Market, supra note 96, at pp. 2-3.

27. 27
short term by 13% nationwide, with regional changes ranging from 8% to 27%.105
Using
a similar approach, another study in the same period estimated that eliminating the MID
would lead to a 28% decline in metropolitan-area housing prices where the average
taxpayer buying a new home is in the highest marginal tax rate.106
The decline was
estimated to be less severe in cities with less-affluent residents.
When a similar analysis was performed using 2006 to 2010 data, the results were
not as clear, showing no discernible correlation between the MID and housing prices.107
Participants at a 2013 Urban Institute Roundtable agreed that post-recession market
conditions have scrambled the traditional relationships among “user costs, rents, and
house prices.”108
If MID reform was implemented during these conditions, it is likely
that several factors would dampen any adverse effects: (1) mortgage rates are currently
at historic lows; (2) rent-to-price ratios are relatively high, increasing demand from
investor-owners to offset any resulting demand from homeowners; (3) affluent owners
might pay off only a portion of their mortgage costs to reduce interest expense, rather
than reducing their demand for housing; and, (4) owner-occupied housing markets would
105
Dennis R. Capozza, Richard K. Green, and Patric H. Hendershott, Taxes, Mortgage
Borrowing, and Residential Land Prices, in Economic Effects of Fundamental Tax Reform 171–
98 (edited by Henry J. Aaron and William G. Gale , Brookings Institution Press, 1996).
106
Benjamin H. Harris, Empirical Essays on Taxation and Tax Policy, Ph.D dissertation, The
George Washington University (Publication No. UMI 3449147) 96-97, .doc/861744689.html?
FMT=AI.
107
Margery Turner, Eric Toder, Rolf Pendall, and Claudia Sharygin, How Would Reforming the
Mortgage Interest Deduction Affect the Housing Market?, Urban Institute,
http://www.urban.org/sites/default/files/alfresco/publication-pdfs/412776-How-Would-
Reforming-the-Mortgage-Interest-Deduction-Affect-the-Housing-Market-.PDF
108
Id.

28. 28
eventually adjust to the reform of the MID negating any long term effect on housing
prices.109
It would be highly unlikely that a conversion to a credit would push prices down
for low- and middle-priced homes because families in those income brackets would be
receiving expanded subsidies. A report by the Urban Institute concluded that "proposals
that shift the MID to benefit low- and moderate-income buyers could actually stabilize
and increase prices of lower-priced homes, whose values continue to lag.”110
A credit
could cause higher-priced homes to lose more value than they might under the existing
MID; however, such factors as prevailing lower interest rates and lower home prices
relative to rents could soften the blow of reform on higher-end home prices.111
Phasing in the conversion of the MID to a credit could further reduce any impact.
The Viard AEI Proposal would phase in the credit over nine years;112
the Bush panel, on
the other hand, proposed a five-year phase-in.113
D. Converting to a Mortgage Interest Credit Could Reduce the Deficit and
More Fairly Equalize Federal Housing Policy
The costs associated with lower- and middle-income families benefitting from the
credit would be more than offset by the reduction of the expenditure currently going to
higher-income households. The non-partisan Taxpayer Policy Center estimated that a
15% non-refundable credit covering interest on mortgages up to $500,000 would raise
109
Id.
110
See Effects on the Housing Market, supra note 96, at pp. 2-3.
111
Id.
112
See Fifteen Ways to Rethink Budget, supra note 89, at p. 48.
113
Tax Reform Panel 2005, supra note 35, at 74.

29. 29
$200 billion over ten years if the credit was phased in over 5 years.114
As noted earlier,
estimates of the amounts raised by the reform vary, but all the reform proposals would
generate large amounts of additional revenue. Hence, conversion to a mortgage-interest
credit would produce positive deficit-reducing effects.
Considered in tandem with these deficit reduction objectives, some reformers
have advocated using a portion of the revenues generated by reform of the MID –
perhaps as much as $5 billion per year – to provide a new tax credit to help the lowest-
income renters afford housing.115
The Tax Bipartisan Policy Center’s Housing
Commission endorsed such a transfer of expenditure, stating that “a portion of any
revenue generated from changes in tax subsidies for homeownership should be devoted to
expanding support for rental housing programs for low-income populations in need of
affordable housing.”116
VI. Conclusion
The federal tax expenditure for the MID currently stands at the third largest, with
an estimated annual expense of approximately $70 billion per year. More than seventy-
percent (70%) of this benefit goes to about 10% of taxpayers (those with incomes at or
above $100,000). If the intended purpose of the MID is to encourage homeownership for
low- to middle-income Americans, then it has failed and is failing to fulfill that purpose.
Rather, the MID is encouraging the purchase of bigger homes and the burden of greater
114
See Options to Reform the MID Deduction, supra note 93, at p. 3.
115
The Ellison bill took another approach, directing the savings from reforming the MID to the
expansion of the Low Income Housing Tax Credit, among other existing housing subsidy
programs.
116
Bipartisan Policy Center, Housing America’s Future: New Direction for National Policy,
February 2013, http://bipartisanpolicy.org/library/report/housing-future.

30. 30
debt among taxpayers in the fourth to eighth quartiles of income earners – those with
adjusted gross income between $75,000 and $200,000.
Yet, the empirical data shows that taxpayers within those income brackets are
virtually all homeowners, enjoying homeownership rates between 80 and 90%. Income
earners in the first and second quintile, on the other hand, have homeownerships rates
ranging between 40% and 55%. Worse, because of its regressive nature, the MID
disproportionately benefits wealthier taxpayers who can obtain and afford larger
mortgages and elect to itemize deductions, rather than lower-income taxpayers with
smaller mortgages whose interest expense is subsumed within the standard deduction.
The imbalance and unfairness with the MID is not new. The MID has been
subject to calls for reform well before it was saved from elimination as a deductible
expense along with other consumer interest under the TRA86. Moreover, sensible
policies suggesting the replacement of the MID with some form of refundable or non-
refundable tax credit have been put forth for almost 20 years, only to fall by way side
because of lack of will power by elected officials and the political strength of the national
real estate lobby.
The transformation of the MID to some form of tax credit would reduce the
unfairness of the current MID and provide equal or greater tax benefits to taxpayers
holding a mortgage that need it the most. Replacing the MID with a non-fundable 15%
tax credit on mortgages up to $500,000 would level the subsidy among third-to-eighth
quartile income earners ($50,000 to $200,000+) and provide a modest increase in the
benefit available to those earning less than $50,000 per year.

31. 31
The proposed credit would also have positive deficit-reducing effects. With the
estimated cost of the MID for 2015 to be approximately $80 billion, a credit like the one
suggested and phased-in immediately would reduce the expenditure to about $63 billion.
Current estimates project that the credit would increase revenues about $10 billion per
year for the next twenty years.
Greater fairness, coverage, and revenue savings could be achieved by reforming
the MID without significant adverse effects to the housing industry or economy. The
credit would replace most of the dollar value of the MID – about 80% – thereby
redistributing the benefit in a more equitable way. While higher-end home values could
be negatively impacted, current low interest rates and lower home prices relative to rents
would be a mitigating factor. Housing markets would adjust to reform of the MID and
thus any pricing impact caused by the deduction-to-tax-credit would not have long-term
effect on the housing market.