MID drives Racial Wealth Gap

The Institute on Assets and Social Policy (IASP) and The National Low Income Housing Coalition (NLIHC) are thrilled to release a timely report, “Misdirected Investments: How the Mortgage Interest Deduction Drives Inequality and the Racial Wealth Gap.” The report shows that while African Americans and Hispanics each account for 13% of the nation’s households, they receive only 6% and 7% of the tax benefits from the mortgage interest deduction (MID). White households receive nearly 78% of the deduction’s benefits.

This report proposes reforms that would provide greater equity in the distribution of federal housing expenditures.

These reforms include converting the deduction to a tax credit, which would provide all mortgaged homeowners with tax relief regardless of their income, and lowering the cap on the amount of a mortgage eligible for a tax break from $1 million to $500,000. The significant savings from these two reforms - $241 billion over ten years- should be reinvested in housing for the lowest income households and households of color who are most in need of assistance through solutions like the national Housing Trust Fund.

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