The \u201cBig Beautiful Bill\u201d perpetuates a long-standing misconception that subsidies provide a lasting boost to the housing sector.<\/p>\n
President Donald Trump\u2019s flagship legislation, signed into law on July 4, will, among other things, quadruple the deductibility of state and local taxes \u2014 commonly known as \u201cSALT\u201d taxes \u2014 up to $40,000 per year for many taxpayers<\/a>. That reverses a $10,000 cap established eight years ago during Trump\u2019s first term in office.<\/p>\n This change will make property taxes a much more likely deduction for a substantial number of California homeowners<\/a> and potential buyers.<\/p>\n So what could be amiss with such government generosity?<\/p>\n Well, it translates to another housing subsidy that further props up ridiculously high sale prices and further complicates a badly wounded real estate market. You see, various ownership incentives, promoted by both political parties over the decades at the local, state and federal levels, have made the housing market overly dependent on such subsidies.<\/p>\n These incentives range from the deductibility of mortgage interest to tax breaks on home sale profits to government cash infusions for down payments<\/a> or other financial needs of home seekers. And don\u2019t forget the Federal Reserve\u2019s manipulation of the mortgage rate landscape<\/a>.<\/p>\n Yes, \u201csupporting\u201d homeownership is a noble cause. Yes, these subsidies are typically offered with the best intentions. Consider the politically well-connected real estate groups that push them, too.<\/p>\n Still, sadly, tossing more money at the housing market only benefits the few who qualify \u2013 and makes house hunting a futile chase for the masses.<\/p>\n Consider that 65% of Americans owned their homes in 2025\u2019s first quarter. That\u2019s the smallest share since the end of 2019, just before coronavirus pandemic upended the economy.<\/p>\n After all that pandemic-era homebuying madness, including historically low mortgage rates, the ownership needle is stuck in neutral.<\/p>\n Too much good stuff<\/p>\n You see, the housing market is excessively stimulated.\u00a0Take the rise in SALT tax deductibility.<\/p>\n It effectively gives house seekers greater financial capability to purchase a home because their property tax expense, post deduction, will be reduced. It\u2019s much like how the ability to write off mortgage interest \u2014 within prescribed limits \u2014 gives borrowers enhanced purchasing power. Same for down-payment assistance programs<\/a>.<\/p>\n And don\u2019t get me started on how the Fed\u2019s ill-fated pandemic-era slashing of mortgage rates \u2013 which included buying $1 trillion of mortgage bonds \u2013 distorted the housing market.<\/p>\n All of it creates more money chasing a limited stock of homes. And the true winners are home sellers who get premium, government-juiced pricing.<\/p>\n Equally troubling are \u201cBill Beautiful Bill\u201d provisions that turbocharge tax breaks for real estate investors<\/a>. This will create more competition for house hunters seeking a place of their own.<\/p>\n If the nation were genuinely committed to home ownership, perhaps it\u2019s time for different tactics.<\/p>\n Falling prices<\/p>\n Simply put, affordable housing means lower prices.<\/p>\n Incomes can\u2019t grow fast enough to keep up with home prices<\/a>. The \u201cBig Beautiful Bill\u201d should boost take-home pay for many Americans. Yet the biggest beneficiaries are probably wealthier folks who already are owners.<\/p>\n Even a massive construction push, often touted as a cure for affordability, only works if housing creation is significant enough to cut home prices. And don\u2019t expect developers to overbuild willingly.<\/p>\n So, envision a scenario where incentives were harshly eliminated. We\u2019re living through one today, namely the Fed\u2019s change of heart.<\/p>\n The central bank\u2019s actions since 2022<\/a> have more than doubled mortgage rates from the all-time lows created by its previous policies.<\/p>\n