By Martin Fridson | Forbes
President-elect Joe Biden’s plan for reviving the U.S. economy may include a tax break aimed at boosting homeownership. Really?
According to a recent MarketWatch article, “The Biden plan would create a new refundable tax credit of up to $15,000 for eligible first-time homebuyers.” Even sweeter, the beneficiaries would not have to wait until tax time to reap their windfall. The proposed credit would reportedly be collectible at the time of the home purchase.
This report came on the heels of Toll Brothers CEO Douglas C. Yearley telling Time, “Since May, we’re in the hottest housing market that I’ve seen in those 30 years.” Possibly the biggest hazard the homebuilders face at present is that lumber demand is so fierce that cost increases could cut into their margins. Only a politician could put these facts together and conclude that America urgently needs yet another homeownership subsidy.
Apparently, little has changed in the political economy of homeownership incentives since I discussed the topic in my 2006 book, Unwarranted Intrusions: The Case Against Government in the Marketplace. Countries such as Canada and Australia have homeownership rates equivalent to or higher than the U.S. without inducements such as mortgage interest deductibility or support by government-sponsored enterprises akin to Fannie Mae and Freddie Mac. Nevertheless, elected officials of both major parties are always eager to pile on more subsidies.