While Trump stokes racial fear, Biden wants to make homeownership more accessible to all
We have our doubts that it will work: The president seems unaware of the rising sympathy for Black Lives Matter in those very same suburbs. His opponent, former vice president Joe Biden, is offering a different message, including a tax proposal that could increase homeownership — suburban or otherwise — to more low-income people more efficiently than current tax policies do. Mr. Biden would institute a refundable tax credit of $15,000 for first-time home buyers, most of whom do not make enough money to itemize their deductions — which means they do not benefit from the main federal tax subsidy for homeownership, the mortgage interest deduction (MID).
Indeed, repeated economic analyses have shown that a tax credit would not only be more progressive, distributionally, than the MID, but also do more to enable home purchases that would not have occurred otherwise. This would be especially true if Mr. Biden imposes an income limit on eligibility, which we assume he will do since his plan cites the model of a temporary Obama administration program that phased out for couples earning more than $150,000 and individuals earning more than $75,000. Like other purchase subsidies, this one could be partially captured by sellers in the form of higher home prices. But existing policies already do that, for the sake of less improvement in housing equity and access.
Mr. Biden says he will pay for the credit, in part, through higher taxes on corporations and large financial institutions. We believe he should be bolder, by eliminating the mortgage interest deduction and using that revenue to offset the new tax credit’s cost. Until now, frontally attacking the MID has been politically risky; suburbanites like it. Yet one of the few positive effects of Mr. Trump’s 2017 tax bill was to cut the annual cost of the MID to $30 billion in 2018, roughly half its previous level, shrinking even further the number of households that can take advantage of it. Its political base narrowed, the MID is ripe for elimination. Replacement of the MID with a targeted tax credit for first-time buyers would rationalize housing policy and possibly chip away at entrenched segregation and wealth disparities. Yes, the “Suburban Lifestyle Dream” can be a beautiful thing. The point is to make it accessible to all who want it.
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