Learn today, plan for tomorrow.
Sign up for news and offers from Planetizen Courses, the online learning platform for planners.
The mortgage interest rate deduction (MID) was designed, in part, to encourage Americans to buy homes and to help them afford those homes while they are living there, but many of those who receive the deduction could easily afford a home without it. In a piece for Greater Greater Washington, David Meni argues that this money could be better spent on rental assistance to people whose housing is a lot less secure.
"For someone with a $1 million mortgage, the MID means that the federal government gives you back about $22,000 a year — enough to push a family of three above the poverty line," Meni reports. This is because the deduction not the same for all home buyers, it's more for those whose mortgages are bigger. "This means that the MID actually incentives mortgage debt, rather than homeownership — you get a larger benefit if you have a more expensive mortgage," David Meni argues. Many economists argue you could remove the deduction and have zero effect on home ownership, meanwhile rental assistance programs, which get about half as much as MID forgoes, really do keep families in homes.