In testimony to Congress, builders backed a new tax incentive but said they also need lower lumber tariffs, fewer regulations and help with their labor shortage.
WASHINGTON – Testifying at a Senate Finance Committee hearing regarding the role of tax incentives in affordable housing, the National Association of Home Builders (NAHB) told Congress that the housing affordability crisis is far-reaching and requires action on several fronts – not just the tax arena.
“The housing affordability crisis is the result of failing to produce enough housing to match demand,” said NAHB Chairman Jerry Konter. “If we are going to solve this crisis, we must drive down the cost to build, as well as the cost to own or rent. Well-structured housing tax incentives can help us achieve this, but Congress needs to take broader action as well.”
“A year ago, nearly one-quarter of new homes were priced under $300,000. Today, it’s 10%,” said Konter.
Recent housing data suggest that the affordability crisis is worsening. In June, housing starts dropped to their lowest level in two years, and NAHB’s latest Housing Market Index (HMI), saw builder confidence in the single-family housing market plunge 12 points lower in July – the second-largest single-month drop in the history of the HMI.
Changing the tax code
NAHB says changes under the 2017 Tax Cuts and Jobs Act significantly reduced the number of taxpayers who itemize because it doubled the standard deduction. However, that changed the mortgage interest deduction into a tax benefit geared primarily to wealthy households.
“A better policy is to scrap the mortgage interest deduction in favor of a 15% tax credit claimed against mortgage interest and real estate taxes paid,” said Konter. “This homeownership tax credit would offer a more effective and progressive tax incentive, help first-time home buyers and young couples with growing families, spur job and economic growth, and keep the nation’s long-standing commitment to housing.”
Konter also urged lawmakers to strengthen the Low-Income Housing Tax Credit by enacting the Affordable Housing Credit Improvement Act to boost production of affordable rental housing. The bill would finance more than 2 million additional multifamily units over the next decade by increasing the credits allocated to each state and expanding the number of affordable housing projects that can be built using private activity bonds.
NAHB also supports a Middle-Income Housing Tax Credit, which addresses a growing need for affordable workforce rental housing, and Konter urged Congress to address housing tax incentives that aren’t indexed for inflation, such as the capital gains exclusion on the sale of a home. He also asked lawmakers to reconsider the current tax limits on the state and local tax deductions.
NAHB’s other affordable housing recommendations
- Ask the Biden administration to suspend tariffs on Canadian lumber imports that contribute to “unprecedented price volatility.”
- Reduce regulations that account for nearly 25% of the price of building a single-family home and more than 40% of a typical multifamily development.
- Help ease the industry’s chronic construction labor shortage that delays building projects and increases costs by promoting and funding job training programs that prepare individuals for careers in the home building industry.
- Ease production bottlenecks that have increased building-material costs 19% in just one year.
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