Mortgage deduction defended by Realtors
McHENRY - Local Realtors are lobbying against any changes in the mortgage interest deduction.
Fiscal cliff negotiations reportedly have included discussions to eliminate or reduce the deduction, which has been a perk for homeowners for nearly 100 years.
Many homeowners of all income levels deduct their mortgage interest when itemizing their deductions. The deduction has helped bolster the income of millions of families – and the broader housing market.
"We're opposed to any change to the mortgage interest deduction," said Jim Haisler, chief executive officer of Heartland Realtor Organization.
Haisler said targeting the deduction is happening at a time when housing is starting to show a turnaround.
"Housing is slowly making a comeback," he said. "We're seeing increases across the board. Transactions are up."
Haisler said closed sales are up 43 percent year-over-year in McHenry County.
"We can't condone any proposal that would harm the modest gains we've seen in housing."
Haisler added, "In eight of the last nine recessions, housing has been the reason we've come out of it. I have a feeling housing is going to do it again."
Most news reports suggest the most likely cut, if there were any, would affect only wealthier households. President Barack Obama and both Democratic and Republican members of Congress generally agree there should be no tax increases for households earning less than $250,000 (or $200,000 for singles).
Should even a small portion of that tax break be eliminated, perhaps for the richest people, to help reduce federal borrowing?
No, said Haisler. "It's a slippery slope. Once the door is open a crack, I'm afraid someone is gong to kick it all the way open."
Haisler said the mortgage interest deduction has been on the chopping block for some time now.
"It's been an issue for a time," said Haiser, whose organization includes McHenry County Realtors. "We've been trying to make sure our message is heard."
Haisler was among a contingent that traveled to Washington, D.C., in May to discuss the issue "in detail" with area representatives.
"We're remaining vigilant, Haisler said.
Homeowners have had the ability to deduct mortgage interest for 99 years, said Conor Brown, government affairs director for the Illinois Association of Realtors.
"Housing didn't cause this fiscal crisis," he said. "Home ownership is an enormous stabilizing factor for communities."
At issue he said, is the American Dream. "People didn't immigrate to this country to be renters."
One argument against curtailing the mortgage deduction is that it could reduce demand for housing, depressing home prices when the housing market is still somewhat weak. The National Association of Realtors believes a removal of the deduction could reduce property values by 15 percent, according to a presentation last year from its chief economist, Lawrence Yun.
Brown said an unintended consequence of reducing or eliminating mortgage interest deductions is the affordability of second home and vacation homes, which would devastate vacations destinations such as Galena and Wisconsin.
Jerry Howard, chief executive of the National Association of Home Builders, said home owners suffered huge losses in personal wealth during the recent collapse of the housing market and the sector should be spared any further dings, he said.
"While the rest of the nation was in a recession, we were in a depression," he said. "Congress should be embarrassed" to even think of asking homeowners to help pay for a fiscal crisis that lawmakers brought on themselves through years of inaction, he added.