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The Gang of 70 Million v. The Gang of Six

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70 million familes is an estimate of the number of Americans who own or are in the process of paying for their own homes.

About 62% of Americans live in their own homes, which is down from a high of 70% in 2004, a reflection of the shock of 2008 on the housing market, a shock from which housing is now only beginning to recover.

The American recovery cannot truly take hold and deepen into an era of robust growth without a strong and expanding housing market. Employment cannot recover without a strong and vibrant housing market. The job generating aspects of home construction are extraordinary as framers, roofers and floorers are just the most obvious of the people employed when houses get built. Think for a moment on the carpet makers and counter top cutters, plumbing manufacturers and insulation assembly lines that all feed product into a new house and you will quickly grasp why home building, far more than anything other industry, drives the American private sector.

Most home owners count that home as their biggest investment, the source of their retirement security and their sense of well-being. When home values fall, consumer confidence falls as well. When home values rise, the economy hums.

Part of the value of every home in America, whether on the market or off, is the tax treatment the home receives if the homeowner is paying interest on his or her mortgage. Note that this value-adder helps all home prices, not just the taxpayer who is currently paying a mortgage, but all home buyers as it is part of the underlying value of the home, like extra bedrooms or a big back yard or a new kitchen. The mortgage interest deduction is an asset that potential buyers weigh in the valuing of the home.

If that deduction is limited in any way, every home owner in America suffers.

Every. Home. Owner.

Proponents of attacking the deduction —and the so-called Gang of Six are said to be among them— argue they would just shave the deduction for high value homes or second homes, which is truly a disingenuous argument.

First, there is one housing market in any given region of the country. If the highest valued homes at the top of that market loses value, so do all the homes further down the chain as the house that was worth a million dollars now is worth $900,000 or less, and the home that was worth $900,000 relative to the top value home must be priced down as well because of the value gap that will be maintained. You cannot argue there is a “top” of the market that can take a haircut without giving everyone else a buzz.

Second, creating any more uncertainty about home values at this point in the recovery is begging for buyers to stay home and wait and see the small print. This particular tax grab could not be more ill-timed.

Over dinner a few weeks ago I asked my pal, economist Richard McKenzie of the University of California Irvine, for a quick estimate of the percentage of the value of a home tied to the tax treatment of mortgage interest. He came up with 20% but of course added the disclaimers that economists like to do. That’s just a ballpark figure, but it should give pause to the Beltway sharpies lining up behind a cap on the mortgage interest deduction. They are proposing to gamble with tens of millions of Americans’ biggest investment because Congress cannot control spending.

Not only is this terrible economic policy, it is political suicide, yet another assault on the tax paying class designed to subsidize the non-payers. It breaks faith with everyone who purchased a home in reliance on the deduction, and would gravel weaken a fragile but crucial sector in the economy. The GOP would be insane to embrace tax hikes of any kind, but especially one aimned at the middle- and upper-middle class home owner.

Call the Gang of Six senators –Democrats Kent Conrad, Dick Durbin and Mark Warner and Republicans Saxby Chambliss, Mike Crapo and Tom Coburn— and tell them to leave America’s homes alone. 202-225-3121. They should also leave off trying to raise the cap on taxable social security earnings at least until after benefit cuts and retirement age fixes are advanced and passed.

The American people did not vote for tax hikes in November, but for spending cuts. Beltway forces are already at work trying to undermine that mandate, and the GOP especially should adamantly refuse to further burden the tax payers of the country and with them the economy. House Rules Chairman David Dreier said on my program that the attack on homeowners was dead on arrival in the House, but that it or a new social security earnings level could even get a hearing among any Republicans is astonishing.

I have represented home builders for 20 years on endangered species, wetlands and entitlement issues. It is a tough business, but the industry is resilient and hyper-efficient, constantly learning new ways to cope with staggering demands from local, state and federal governments and still delivering new homes to a (usually) hungry market. The Congress has to be finding ways to help this industry –say with reforms of the ESA or Clean Water Act– not further cripple it.

To help hold off the Gang of Six and the president, visit sponsored by the National Association of Home Builders. For additional information on this and other crucial issues impacting housing, visit


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