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There has been discussion in Congress in regard to eliminating or curtailing the mortgage interest deduction. Recently Robert Dietz, an economist for the National Association of Home Builders (NAHB) told Congress that how housing is treated in future tax reform will shape the economy going forward.

Most Americans consider homeownership to be their single best long-term investment and a primary source of wealth and financial security. According to a 2007 Federal Reserve Survey, the median net worth of a home owner is much greater compared to renters. The reason for this is the gain in equity as the mortgage is paid down and as home value increases.

Tampering with the mortgage interest deduction would undermine an already fragile housing market and wreak havoc on the tenuous economic recovery by hurting housing demand, which would place downward pressure on home prices. This would leave more home owners underwater and trigger even more foreclosures. Any policy change that lessens interest in home buying will have a significant long-term impact on household wealth accumulation and the make-up of the middle class.

In a New York Times/CBS News poll conducted in June of 2011, 89 percent opposed doing away with the mortgage interest deduction.

Dietz told lawmakers that that a deduction that reduces the net cost of monthly house payments is particularly important to younger home buyers who have large home loans and less equity and are paying mostly interest in the early years of their mortgage. Younger, middle-class families could see their ability to become home owners significantly diminished without this deduction.

Eliminating the mortgage deduction for second homes could threaten the economic viability of second home and vacation markets. Plus, home owners are currently allowed to deduct interest on up to $100,000 of home equity loan debt. Half of all home equity loans are used for remodeling and home improvement, which provides jobs. Dietz said, “Housing can act as a catalyst for job growth and an economic recovery because home building employs such a wide range of workers.”