McMansions = Tax Headache?
I have made no secret that I am not a fan of the McMansion. I have yet to figure out why many Americans feel the need to have enormous homes on tiny lots in the middle of nowhere. Even more confusing are the prices that folks are willing to pay. A friend of ours purchased such a home 10 years ago for nearly $750,000 - 10 years ago! Since then, prices have skyrocketed for the McMansion - in more ways than one. Our friend has since replaced many of the “features” of the home that were not as advertised. But in a sea of sameness, the developer cared more about volume than quality.
Owning that home may get even more expensive if Michigan Representative John Dingell gets his way. He is proposing a new law to eliminate the mortgage interest deduction for homes larger than 3,000 square feet. Approximately 10.4 million homes in America measure more than 3,000 square feet, or about 15% of total U.S. housing stock.
Dingell claims that these large homes waste energy and contribute to climate change. And of course, as previously discussed, tax is really all about driving policy.
Dingell isn’t the only force driving a potential scurry from the McMansion. The free market is doing its share. Existing home sales have slumped to their lowest rate in 5 years (don’t I know it, as my house is currently on the market!). The prior increase in home sales has been attributed to low mortgage rates and subprime lending.
While I don’t necessarily agree with Dingell, I definitely don’t agree with Bill Killmer, a policy advisor to the Washington-based National Association of Home Builders, who stated “Home size is not a good indicator of the amount of energy a household would use.” He suggested that the number and types of appliances affected overall energy use. True. But, I don’t care how many Energy-Star washers you buy, it costs more - generally - to heat a 5000 square ft home than it does a 1500 square ft home.
The mortgage deduction costs US taxpayers U.S. Treasury an estimated $100 billion per year. That’s huge. And the elimination of the deduction is not a novel idea. In 2005, a Bush administration panel recommended a similar proposal which was tabled after an outcry by the housing industry. But that industry doesn’t have the clout it once did. Maybe the times are a-changin?
