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Mortgage Interest Deduction Research Note

Proposed Changes to the Mortgage Interest Deduction, and What They Could Mean for Rural America

Cover of Rural Research Note Proposed Changes to The Mortgage Interest Deduction, And What They Could Mean for Rural AmericaRecent legislative proposals to lower U.S. tax rates have included, among other elements, modifications to the mortgage interest deduction. The proposed limiting of the mortgage interest deduction to the first $500,000 of a home loan, just half of the current $1 million limit, has drawn the public’s attention. Questions on the potential cost to taxpayers associated with the more stringent deduction limits have naturally followed. The following discussion looks at the role of the mortgage interest deduction in rural areas.

Read the Research Note

Income Tax Returns Claiming Mortgage Interest Deduction, 2015

HAC News: November 6, 2017

HAC News Formats. pdf

November 6, 2017
Vol. 46, No. 22

Tax plan proposed in House would cut mortgage interest deduction • USDA begins periodic review of rural areas • RHS names new deputy for multi-family • VA offers transitional housing funds and amends regs on homeless veterans • CDFI Bond Guarantee Program accepting applications • Lead exposure strategy input sought by HUD • USDA multifamily financial reporting requirements revised • USDA RD extends foreclosure moratoriums for Section 502 guaranteed loans in disaster areas • HUD sets operating cost adjustment factors • House Financial Services chair Hensarling to leave Congress • Senate hearing addresses cost and coverage of 2020 Census • November 11-19 is Hunger & Homeless Awareness Week • Maine case studies address rural seniors’ housing • “Meeting Native American Housing Needs” subject of Rural Voices • HAC offers symposium on Affordable Housing Solutions for Rural Veterans

HAC News Formats. pdf

November 6, 2017
Vol. 46, No. 22

Tax plan proposed in House would cut mortgage interest deduction. H.R. 1 , introduced on November 2, would retain the Low Income Housing Tax Credit, eliminate private activity bonds and the 4% credit, end the New Market Tax Credit Program, and reduce the mortgage interest deduction. Homeowners would be able to deduct interest payments made on up to $500,000 in home loans, rather than the current $1 million. The funds generated by this change would be used to cover the cost of lowering other taxes. The House Ways and Means Committee will consider the bill on November 6.

USDA begins periodic review of rural areas. An Unnumbered Letter dated October 19, 2017 provides guidance for RD field offices’ five-year review of service areas for the rural housing programs. Currently eligible areas that have grown in population may still be considered rural if they are “rural in character.” The UL states that a population density of under 1,000 persons per square mile indicates a place is rural in character.

RHS names new deputy for multi-family. Effective November 12, Bryan Hooper will become RBS’s Deputy Administrator for Business Programs and Joyce Allen will become Deputy Administrator for Multi-Family Housing, leaving her position as Deputy Administrator for Single-Family Housing. Cathy Glover will serve as Acting Deputy for Single-Family.

VA offers transitional housing funds and amends regs on homeless veterans. Nonprofits and state, local, and tribal governments can apply by February 28, 2018 for Homeless Providers Grant and Per Diem funds to provide transitional housing beds. For more information, contact Jeffery Quarles, 877-332-0334. VA has also broadened its definition of homeless veterans eligible for VA aid, and will increase the per diem payments for homeless veterans placed in transitional housing that will become permanent housing. For more information, contact Guy Liedke , 877-332-0334.

CDFI Bond Guarantee Program accepting applications. CDFIs can apply by January 9, 2018 to become Qualified Issuers that will issue bonds, and by January 23 to receive bond guarantees. The bond proceeds will be loaned to other CDFIs, which will make loans for community and economic development. For more information, contact CDFI Bond Guarantee Program staff by January 16, 202-653-0421, option 5.
Lead exposure strategy input sought by HUD. HUD co-chairs the Lead Subcommittee of the President’s Task Force on Environmental Health Risks and Safety Risks to Children (established in 1997), which is developing a new federal lead strategy. HUD requests comments by November 24 on the strategy, especially on priority risks and goals, strategy development and implementation, and messaging and outreach. For more information, contact Warren Friedman, HUD, 202-402-7698.

USDA multifamily financial reporting requirements revised. Instead of requiring annual audits based on the number of units in a rental property, RHS will require them based on the amount of federal assistance used. For borrower fiscal years beginning on and after January 1, 2018, annual audits will be required for properties with combined federal assistance above $750,000 for nonprofit owners and $500,000 for for-profit owners. HUD will accept RHS audits for properties with Section 8. For properties below those thresholds, owner certifications will be required. Also, all borrowers will now be required to certify there have been no changes in ownership, real estate taxes are current, and replacement reserve accounts have been used only for authorized purposes. For more information, contact Janet Stouder, USDA, 202-720-9728.

USDA RD extends foreclosure moratoriums for Section 502 guaranteed loans in disaster areas. The moratorium in the presidentially declared disaster area for Hurricane Harvey will last until February 21, 2018; for Hurricane Irma until March 9, 2018; and for Hurricane Maria until March 19, 2018.

HUD sets operating cost adjustment factors. The OCAFs will be used to adjust rents for project-based Section 8 contracts being renewed under the Multifamily Assisted Housing Reform and Affordability Act with an anniversary date on or after February 11, 2018. For more information, contact Carisa L. Janis, HUD, 202-402-2487.

House Financial Services chair Hensarling to leave Congress. Rep. Jeb Hensarling (R-TX) announced on October 31 he will not run for reelection in 2018. As chairman of the Financial Services Committee, he has overseen efforts to reform the financial system, including housing finance.

Senate hearing addresses cost and coverage of 2020 Census. Asked about reaching rural residents, at an October 31 Senate Committee on Homeland Security hearing Commerce Secretary Wilbur Ross summarized planned outreach and advertising efforts including possible installation of census kiosks in Post Offices. He also described a potential relationship with Post Office employees, who know the communities where they work and are more likely to be trusted than outsiders are. Government Accountability Office testimony prepared for the same hearing focuses on GAO concerns about data security, progress on systems and testing, and costs.

November 11-19 is Hunger & Homeless Awareness Week. The occasion , sponsored by the National Coalition for the Homeless and the National Student Campaign Against Hunger and Homelessness, features events in hundreds of locations nationwide.

Maine case studies address rural seniors’ housing. A HUD article, “Housing Challenges of Rural Seniors,” reports HAC research on needs and also describes efforts in three rural Maine communities that focus on accessibility, home repairs, and volunteer assistance to help seniors age in place.

“Meeting Native American Housing Needs” subject of Rural Voices. The fall 2017 issue of HAC’s quarterly magazine focuses on the progress being made in improving the housing conditions of Native Americans.

HAC offers symposium on Affordable Housing Solutions for Rural Veterans. The session, to be held December 5 in Washington, DC, will showcase model programs that are providing homeownership, home repairs, service to the homeless, and rental housing options. There is no registration fee, but space is limited and advance registration is required. For more information, contact Shonterria Charleston , HAC, 404-892-4824.

NEED CAPITAL FOR YOUR AFFORDABLE HOUSING PROJECT?
HAC’s loan funds provide low interest rate loans to support single- and multifamily affordable housing projects for low-income rural residents throughout the U.S. and territories. Capital is available for all types of affordable and mixed-income housing projects, including preservation, farmworker, senior, and veteran housing. HAC loan funds can be used for pre-development, site acquisition, site development, and construction/rehabilitation. Contact HAC’s loan fund staff at hacloanfund@ruralhome.org, 202-842-8600.
Please note: HAC is not able to offer loans to individuals or families. Borrowers must be nonprofit or for-profit organizations or government entities (including tribes).

HAC News: October 23, 2017

HAC News Formats. pdf

October 23, 2017
Vol. 46, No. 21

David Lipsetz named next HAC Executive Director • Senate passes budget resolution • Disaster relief passes House • Carson testifies before House committee • USDA used all FY17 funding for Section 502 direct • Report finds large majority of distressed counties are rural • Social scientists consider “Rural Poverty in America.” • Mortgage interest deduction drives inequality and the racial wealth gap, report says • New tool measures neighborhood opportunity • HAC publishes disaster guide supplement for California fires • USDA-RD releases Customer Service Information Guide

HAC News Formats. pdf

October 23, 2017
Vol. 46, No. 21

David Lipsetz named next HAC Executive Director. HAC’s board of directors has named David Lipsetz to replace Moises Loza, who is retiring on November 1. Lipsetz held several senior positions at USDA and HUD, most recently as the Associate Administrator of USDA’s Rural Housing Service.

Senate passes budget resolution. The Senate’s version of H.Con.Res. 71, passed on October 19, calls for significant cuts in domestic discretionary programs, which include housing. The House earlier passed its own version (see HAC News, 10/5/17), supporting even deeper spending reductions. Both houses of Congress are expected to agree on a final version that will serve as a vehicle for tax cuts.

Disaster relief passes House. On October 12 the House approved $36.5 billion in aid for hurricane recovery and efforts to fight wildfires. The Senate is expected to pass the bill, H.R. 2266, the week of October 23.

Carson testifies before House committee. HUD Secretary Ben Carson was the sole witness at an October 12 oversight hearing by the House Financial Services Committee. He emphasized his hope to increase private sector involvement in affordable housing.

USDA used all FY17 funding for Section 502 direct. The program made 7,187 loans totaling nearly $1 billion in FY17, up from $903.5 million (6,727 loans) last year. Very low-income borrowers accounted for 38.1% of the total Section 502 direct loan dollars. In the Section 515 Rural Rental Housing program, there were 31 loans totaling $35 million. For the Farm Labor Housing programs, USDA obligated 21 loans totaling $35.0 million and 6 grants. USDA obligated funds for 302,451 rental assistance units under the Section 521 Rental Assistance program, totaling $1.37 billion. There were also 5,609 Rural Housing Vouchers totaling $22 million. HAC’s obligation report is available online.

Report finds large majority of distressed counties are rural. The Distressed Communities Index, a recent report from the Economic Innovation Group, measures distress at the zip code and county level based on metrics including median income, poverty rate, and housing vacancy rate. Among the findings: “Nearly 98 percent of distressed counties have fewer than 100,000 people and 90 percent have fewer than 50,000 people, making them overwhelmingly rural”; “distress is mainly urban in the Northeast and rural in the South, but prosperity tends to be suburban in every region.” Interactive maps are also available online.

Social scientists consider “Rural Poverty in America.” On October 19, the American Enterprise Institute and the American Academy of Political and Social Science hosted a panel discussion on rural poverty, now archived online. The July 2017 issue of the AAPSS Annals addresses “The New Rural-Urban Interface,” with articles covering ethnoracial diversity, economic conditions, upward mobility of low-income youth, long-term poverty trends, political polarization, education, and more.

Mortgage interest deduction drives inequality and the racial wealth gap, report says. “Misdirected Investments,” a publication by the Institute on Assets and Social Policy and the National Low Income Housing Coalition, offers ideas on reforming the mortgage interest deduction to expand opportunities for homeownership and promote more equitable benefits across all communities.

New tool measures neighborhood opportunity. Opportunity 360 is a platform created by Enterprise Community Partners that provides datasets, tools, case studies, and evidence-based methodology to measure basic indicators of well-being for residents in every community in the U.S. Users can access data for any census tract, region, or state. Enterprise suggests the data can be used to conduct needs assessments; build a case for certain investments or interventions; start a community conversation; or identify potential partners for delivering on programmatic priorities.

HAC publishes disaster guide supplement for California fires. A new supplement to HAC’s disaster guide offers information for survivors of the wildfires.

USDA-RD releases Customer Service Information Guide. The guide, available in English and Spanish, provides information to homeowners about the Customer Service Center, where Section 502 direct loans are serviced. It supplies contact information, payment option information, and answers frequently asked questions.

UPCOMING HAC EVENTS
Affordable Housing Resources Development Best Practices, Challenges and Opportunities
October 24, Decatur, AL
This comprehensive session will focus on examination of affordable housing and supportive services, particularly as they relate to rural development, with particular attention on addressing challenges, best practices and opportunities for greater collaboration – essential to the production, provision and sustainability of affordable housing. This event is sponsored by BBVA Compass Bank, who will also outline their housing products. For more information, contact Shonterria Charleston, HAC, 404-892-4824. There is no registration fee, but advance registration is required.

Affordable Housing Solutions for Rural Veterans: A Symposium
December 5, Washington, DC
The symposium will showcase model programs that are providing homeownership, home repairs, service to the homeless, and rental housing options. There is no registration fee, but space is limited and advance registration is required. For more information, contact Shonterria Charleston, HAC, 404-892-4824.

NEED CAPITAL FOR YOUR AFFORDABLE HOUSING PROJECT?
HAC’s loan funds provide low interest rate loans to support single- and multifamily affordable housing projects for low-income rural residents throughout the U.S. and territories. Capital is available for all types of affordable and mixed-income housing projects, including preservation, farmworker, senior, and veteran housing. HAC loan funds can be used for pre-development, site acquisition, site development, and construction/rehabilitation. Contact HAC’s loan fund staff at hacloanfund@ruralhome.org, 202-842-8600.
Please note: HAC is not able to offer loans to individuals or families. Borrowers must be nonprofit or for-profit organizations or government entities (including tribes).

HAC News: February 16, 2017

HAC News Formats. pdf

February 16, 2017
Vol. 46, No. 4

HUD and USDA nominations moving slowly • HAC offers rural creative placemaking funds • Administration and Congress begin changing Dodd-Frank • Pence economic advisor supports reforming mortgage interest deduction • House subcommittee considers “The Geography of Poverty • USDA RD encourages summer meal program again • Lead control funds offered • Climate and cultural resilience grants available • RD sets FY17 area loan limits for Sec. 502 direct, continues pilot alternative • ACF extends deadline for Native American input • USICH offers suggestions on opioid use and homelessness • Nominations open for HUD awards on healthy homes, historic preservation • Rural housing is infrastructure, says HAC blog post • Students and communities benefit from art, including creative placemaking

HAC News Formats. pdf

Februrary 16, 2017
Vol. 46, No. 4

HUD and USDA nominations moving slowly. The Senate unanimously confirmed David Shulkin as VA Secretary on February 13 and is expected to confirm Rep. Mick Mulvaney (R-SC) as OMB director on February 16. The time taken to approve Mulvaney may delay the administration budget request for FY18 beyond the February 28 date previously predicted (see HAC News, 2/2/17). The Senate has not yet voted on Dr. Ben Carson as HUD Secretary and the Senate Agriculture Committee has not scheduled a hearing on Sonny Perdue’s nomination to be USDA Secretary. Congress will be on President’s Day recess the week of February 20.

HAC offers rural creative placemaking funds. HAC is partnering with the buildingcommunityWORKSHOP ([bc]) to offer grants of up to $7,500 each for two short-term arts and community building projects in communities with populations under 50,000. Housing or community development organizations are eligible and may apply in partnership with an artist or arts organization. HAC and [bc] can also facilitate selection of a partner artist/organization. A recorded webinar about this initiative is available on HAC’s site, and a second webinar is tentatively scheduled for late March or early April. Apply by March 10. For more information, contact Michaela Accardi, [bc].

Administration and Congress begin changing Dodd-Frank. President Trump’s Executive Order 13772 sets out Core Principles for regulating the U.S. financial system, which include “rationalizing” the federal financial regulatory framework. It orders the Treasury Secretary and Financial Stability Oversight Council to report on laws, treaties, regulations, and policies that promote or inhibit the Core Principles. The EO has been described as a request for a review of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which made changes to oversight of the U.S. financial system, including housing finance. Separately, on February 14 President Trump signed H.J.Res. 41 into law, canceling an SEC regulation required by the Dodd-Frank Act (not related to housing).

Pence economic advisor supports reforming mortgage interest deduction. Vice President Mike Pence has hired Mark Calabria, former Director of Financial Regulation Studies at the conservative Cato Institute, as his chief economist. A few days before changing jobs, Calabria co-authored an opinion piece titled “Time to reform the mortgage interest deduction” with Diane Yentel, President and CEO of the National Low Income Housing Coalition. They suggested that MID reform could “generate significant savings” which, “in turn, could provide some combination of tax cuts, deficit reduction, and reinvestment in critical affordable rental housing programs that serve people with the greatest needs.”

House subcommittee considers “The Geography of Poverty.” The Human Resources Subcommittee of the Ways and Means Committee held a hearing February 15, which included testimony and discussion of differences in rural, suburban, and urban poverty. Written testimony and the recorded hearing are available online.

USDA RD encourages summer meal program again. An Unnumbered Letter suggests that USDA-funded multifamily properties, community facilities, and self-help communities provide sites where meals can be served when school is out. Contact an RD state office.

Lead control funds offered. Local and state governments, tribes, and consortia of those entities can apply by March 23 for HUD Lead-Based Paint Hazard Control Grants to identify and remediate lead-based paint hazards in privately owned rental or owner-occupied housing. Those entities are also eligible for Lead Hazard Reduction Demonstration Grants, with the same deadline, if they have at least 3,500 pre-1940 occupied rental housing units. For more information, contact Shannon Steinbauer, HUD.

Climate and cultural resilience grants available. Enterprise Community Partners will make five $100,000 grants to CDCs, CHDOs, and tribal housing entities for projects in which residents, artists, and others collaborate to address a local climate resilience challenge. The deadline is March 31. An informational webinar will be held February 22. For more information, contact design@enterprisecommunity.org.

RD sets FY17 area loan limits for Sec. 502 direct, continues pilot alternative. An Unnumbered Letter dated February 3, 2017 explains how RD state offices can establish limits for Section 502 direct loans, and extends an FY15 pilot that uses an alternative method for a number of states. Georgia and Indiana are added to the pilot this year. For more information, contact an RD State Office.

ACF extends deadline for Native American input. The Administration for Children and Families will accept comments until May 9 rather than March 10 on issues, challenges, and recommendations related to American Indian and Alaska Native populations. (See HAC News, 1/19/17.) For more information, contact Camille Loya, ACF, 202-401-5964.

USICH offers suggestions on opioid use and homelessness. “Strategies to Address the Intersection of the Opioid Crisis and Homelessness,” published by the U.S. Interagency Council on Homelessness, describes five strategies for communities and provides links to other resources.

Nominations open for HUD awards on healthy homes, historic preservation. ♦ Submissions are due March 15 for the HUD Secretary’s Award for Healthy Homes, offered in partnership with the National Environmental Health Association to recognize excellence in healthy housing innovation. For more information, contact hudaward@neha.org. ♦ The HUD Secretary’s Award for Excellence in Historic Preservation is made in partnership with the Advisory Council on Historic Preservation. The deadline is March 27. For more information, contact helpdesk@huduser.gov.

Rural housing is infrastructure, says HAC blog post. Investment in rural affordable housing creates jobs, benefits states and localities, and aids families, as explained in a recent post written as part of a series for the Campaign for Housing and Community Development Funding.

Students and communities benefit from art, including creative placemaking. In a post on Rooflines, Shelterforce’s blog, HAC staffer Stephen Sugg describes his research on arts education and the importance of creative placemaking for low-income communities.

HAC News: October 10, 2012

HAC News Formats. pdf

October 10, 2012
Vol. 41, No. 20

• Presidential candidates’ and parties’ positions limited on rural and housing • USDA and BIA commit to work together for Indian Country housing improvement • Continuum of Care comment deadline extended • HUD requests comment on smoke-free policies • FY12 Fair Market Rents finalized • Difficult Development Areas announced • Additional instructions provided on RAD • Poll Finds Support for Modifying Mortgage Interest Deduction


October 10, 2012
Vol. 41, No. 20

PRESIDENTIAL CANDIDATES’ AND PARTIES’ POSITIONS LIMITED ON RURAL AND HOUSING. The candidates on rural issues: On October 9 the Romney campaign released “Agricultural Prosperity: Mitt Romney’s Vision for a Vibrant Rural America,” which addresses taxes, trade, regulation, and energy as they relate to farmers and ranchers. The Obama campaign’s web page entitled “Rural America” mentions agriculture, rural businesses, rural veterans, and energy and another post responds to Romney’s rural paper. The parties on rural issues: The Republican platform discusses agriculture but does not include other rural issues. The Democratic platform mentions rural small business, education, and infrastructure – though not housing – in addition to agriculture and energy. The candidates on housing: Romney’s white paper on housing, “Securing the American Dream and the Future of Housing Policy,” covers the housing finance crisis and the Romney-Ryan plan to “revitalize the private sector’s role in the housing market.” The issues section of Obama’s campaign website does not include housing, although a site search retrieved information about Administration initiatives on foreclosure and housing finance. The parties on housing and poverty: The Republican Party platform supports homeownership and mortgage finance reform, and acknowledges a role for government in “enforcing non-discrimination laws and assisting low-income families and the elderly with safe and adequate shelter, especially through the use of housing vouchers.” Its anti-poverty plank calls for “the federal government’s entire system of public assistance [to] be reformed to ensure that it promotes work.” The Democratic Party platform sup-ports homeownership and foreclosure relief, but does not mention rental housing. It states, “We must make ending poverty a national priority” through jobs, safety net programs, lending, an increased minimum wage, a strong labor movement, education, and attention to inequality. The parties on Native peoples: Both parties acknowledge the federal government’s special relationship with American Indians, Alaska Natives, and Native Hawaiians. Both support tribal self-governance and respect Native culture.

USDA AND BIA COMMIT TO WORK TOGETHER FOR INDIAN COUNTRY HOUSING IMPROVEMENT. Two Memoranda of Understanding, effective for five years, apply to housing as well as other rural development programs, farm programs, and conservation. They pledge better understanding and coordinated processes related to housing. Contact Tedd Buelow, RD, 720-544-2911.

CONTINUUM OF CARE COMMENT DEADLINE EXTENDED. Interim CoC regulations were published July 31 with comments due October 1. The deadline is now November 16. See Federal Register, 9/28/12, or regulations.gov. Contact Ann Marie Oliva, HUD, 202-708-4300.

HUD REQUESTS COMMENT ON SMOKE-FREE POLICIES. The department requests best practices and practical strategies from housing providers who have implemented smoke-free policies and input from housing providers that have decided not to implement such a policy and from those impacted by that decision. Comments are due November 5. See Federal Register, 10/4/12 or regulations.gov. Contact Shauna Sorrells, HUD, 202-402-2769.

FY12 FAIR MARKET RENTS FINALIZED. See Federal Register, 10/5/12, or HUDUser.org. Contact local HUD program staff.

DIFFICULT DEVELOPMENT AREAS ANNOUNCED. HUD designates DDAs for purposes of the Low-Income Housing Tax Credit. Adoption of small area DDAs (see HAC News, 11/1/11) has been delayed. Qualified Census Tracts for 2013 were designated in April 2012 (see HAC News, 5/2/12). See Federal Register, 9/28/12 or HUDUser.org. Contact Michael K. Hollar, HUD, 202-402-5878.

ADDITIONAL INSTRUCTIONS PROVIDED ON RAD. HUD’s information is for PHAs and owners applying under the Rental Assistance Demonstration to convert public and assisted housing to long-term, project-based Section 8 rental assistance. See Federal Register, 9/28/12, or HUD’s website. Contact HUD RAD staff.

POLL FINDS SUPPORT FOR MODIFYING MORTGAGE INTEREST DEDUCTION. A poll conducted in August for the National Low Income Housing Coalition found that 56% of Americans favor replacing the mortgage interest deduction with a tax credit that would provide the same percentage benefit for all households regardless of income. Nearly two-thirds (63%) support capping the size of mortgage for which one can get a tax break at $500,000. In addition, 68% believe that not being able to find affordable housing is a large or very large national problem. Strong majorities support federal programs to build or rehabilitate affordable rental housing (69%) and federal programs to help low-income families pay their rent (59%). When asked how to use the savings the federal government would gain from the proposed modifications to the mortgage interest deduction, 63% of those polled would make ending homelessness a top or high priority use. Contact Amy Clark, NLIHC, 202-662-1530, ext. 227.