President Joe Biden wants to give Americans a $10,000 tax credit – just for selling their homes.
The president acknowledged this week that the real estate market is stalled amid sky-high mortgage rates.
The government hopes the measure will help “unshackle homeowners,” a shorthand way of saying that people are stuck in their homes because they don’t want to give up the low mortgages they obtained in the past.
How the government’s proposal would work
The $10,000 credit aims to encourage people to sell theirs, freeing up those homes for first-time buyers, as the credit is intended for middle-class families looking to upgrade their housing.
At the same time, the government’s plan also includes a tax credit for first-time buyers, aimed at offsetting the cost of the current high financing rates (the 30-year mortgage is currently fluctuating below 7%). Dubbed the “mortgage relief tax credit,” it amounts to a $5,000 credit per year for two years.
The downside
Some experts believe that the two credits together could be a boon for housing demand, attracting more people to the real estate market, but ultimately driving up prices.
The credits are a way to boost sales – not to improve affordability, said Daryl Fairweather, chief economist at Redfin, to Axios.
“This is a way to lessen the impact of high rates on the housing sector. Because even though the rest of the economy has recovered and is growing, the housing sector is suffering,” she added.
Beyond the tax credit
The tax credits are receiving a lot of attention, but Biden’s housing proposal also includes measures that more directly address affordability.
The plan includes a $20 billion grant fund aimed at building more rental housing and encouraging local governments to remove barriers to new construction – such as zoning laws that prohibit certain types of building.
Overall, the White House claims that all proposed measures could lead to an additional 2 million homes – or about half of the current housing deficit.
It is worth noting, however, that this is just a government proposal. Congress, in its current state, is unlikely to adopt major housing legislation.
Still, it is important that ideas like these are being discussed.
Source: AXIOS