"We will oppose any limit," said Jerry Howard, chief executive of the National Association of Home Builders. "This is an attack on the middle class."
The homebuilding industry is concerned that capping the deduction will further erode the housing market, and kill off any life it may have been showing. Home builders have had theirSee photos of homes for sale in your area and across the country on AOL Real Estate worst year since 1963; tighter lending guidelines have all but ended spec home building and without the lure of a tax break, home builders say they may as well go build sandboxes. Single-family housing starts are down 63 percent from peak production levels during the boom, and down 80 percent or more in some troubled markets. Capping the deduction will hurt the already flailing industry, say builders.
On Tuesday, Yale economist Robert Shiller confirmed their fears: The government's withdrawal from the GSEs (that's Fannie Mae and Freddie Mac) and ending support for the home industry could send home prices spiraling even -- gulp -- 25 percent further. The nation as a whole saw a 4.1 percent annual decrease in home prices in the latest Case-Shiller report, which tracks 20 metropolitan cities. The only two cities who didn't look anemic Tuesday were San Diego and , D.C.
"Policy-wise, this administration has done nothing to address the problems inherent with acquisition of construction financing," says Bob Morris, executive vice president and chief executive officer of the Home Builders Association of Greater Dallas.
It's the toughest it's ever been for builders, who in good times have fueled jobs for the economy. What's particularly distressing to Morris and his colleagues is the fact that the White House has yet to meet with leadership of the National Association of Home Builders.
"Two years after the inauguration, and NAHB is still waiting for an invitation to the White House", says Morris.
Here's how NAHB estimates home building's impact upon jobs:
•3.05 jobs and $89,216 in taxes (from building an average new single family home).
•1.16 jobs and $33,494 in taxes (from building an average new multifamily rental unit).
•1.11 jobs and $30,217 in taxes (from $100,000 spent on residential remodeling).
The home interest deduction costs the Treasury Department about $131 billion a year. In December, a presidential debt panel recommended turning the itemized deduction in to a 12 percent nonrefundable tax credit available to everyone. It would also cut the size of eligible mortgages in half to up to $500,000.
Enter the National Association of Realtors, 80 percent of whose members claim they will remain vigilant in opposing any plan that modifies or excludes the deductible of mortgage interest
"A few members have suggested that we give up on the mortgage interest deduction," 2011 NAR president Ron Phipps posted on the NAR blog. "However, a vast majority of NAR members...said in a recent survey they favor retaining the mortgage interest deduction as is and look to NAR to carry that message to Washington."
During these financially challenging times, government incentives must be scrutinized, says Phipps. But let's not allow our critics to use today's crisis to end a policy that has served U.S. citizens well for decades.
And when the Realtors Association speaks, lawmakers listen. The group spent $17.6 million on lobbying in 2010, the 13th highest, according to the Center for Responsive Politics.
In all, the real estate and home building industries spent more than $68 million lobbying last year.
For more on mortgages and related topics see these AOL Real Estate guides:
- Stop Foreclosure Scammers Before They Scam You
- How to Get a Low Mortgage Rate
- Mortgage Jargon in Simple Terms
- How Much Home Can I Afford?
- How to Buy Foreclosures
- Closing Costs: How Much to Budget
- Guide to Settlement and Escrow
Candy is an award-winning, Dallas-based real estate reporter, blogger, and consultant. She's the gal who brought House Porn to the Bible Belt! Read more at SecondShelters.com and send story ideas and tips to CandyEvans@secondshelters.com.