Economists’ View

Economists have long been critical of the mortgage-interest deduction because it disproportionately benefits people with more-expensive properties, including many who would have purchased even without the break. It also inflates home prices because buyers often overestimate their tax savings when they’re budgeting for a purchase, said Dennis Ventry, a professor at University of California, Davis, School of Law who has studied the program’s history.

Trump’s plan might end up boosting homeownership rates over time because a drop in prices would improve affordability and the standard deduction would give buyers more money to spend on a house, Ventry said.

The real estate industry is lining up against the proposal, including the powerful National Association of Realtors, which spent $10.2 million lobbying Congress in the first quarter, more than any other organization except the U.S. Chamber of Commerce, according to the Center for Responsive Politics. William E. Brown, the association’s president, said his group isn’t just fighting for its members.

“If values fall, it’s not just going to impact people who just bought houses, but all current homeowners,” Brown said.

Fighting Back

Trump’s plan also targets tax deductions for state and local taxes paid -- a provision that would especially hurt homeowners in states where property taxes are high. Coldwell Banker Realtor Kevin Cascone, who’s based in Westfield, New Jersey, took to Facebook on May 3 to persuade his followers to fight back by contacting their legislators: “NEW JERSEY HOMEOWNERS! This should concern you deeply,” Cascone wrote. “Regardless of your politics, the terms of this policy could SIGNIFICANTLY affect your wallets come tax season next year.”

“One of the big reasons for homeownership is the ability to deduct property taxes,” Cascone said. “If that’s eliminated, what’s the difference between renting and buying?”

Marc Shenkman, president of Priority Financial Network, a lender in Calabasas, California, said the vast majority of his customers itemize on their tax returns and would no longer take advantage of the mortgage-interest deduction if Trump’s proposal goes through.

“I can’t tell you how many people say ‘I’ve got to buy that house because I have to get the deduction,’” said Shenkman, whose firm makes about $1 billion a year in home loans. “It’s really a psychological thing more than anything.”