Proposition 13 in California is blamed by prospective home buyers as being one of the reasons buying a house is so expensive. “Long-time homeowners aren’t paying their fair share.” What we rarely see is that income tax deductions for mortgage interest favor new home buyers. Taxes never make anything cheaper unless a tax “refund” is given for taxes that weren’t paid.

Long-time homeowners will typically have much lower mortgages and thus much less opportunity, if any, to deduct their mortgage from their income taxes. Long-time homeowners bought their home at a lower price and thus a lower mortgage, and have also paid off a significant portion, possibly all, of their mortgage. With time, standard deductions grow and the mortgage interest decreases, the value of the mortgage deduction can disappear entirely. New home buyers who take on significant mortgages to purchase their homes are the biggest beneficiaries of the mortgage deduction.

Too much of the housing affordability discussion is focused on taking away from one group of people to give to a different group of people. Voters should hold government officials accountable for affordability, and should stop them from pushing voters towards fighting each other over deductions.

These thoughts were triggered by an article that said SALT deductions make housing more expensive.