A Modest HUD Budget Proposal: Limit Growth to No More than Growth in Mortgage Deduction and Property Taxes.

With the federal budget promising to be more contentious than ever it occurred to me that the HUD budget discussions might benefit from a benchmark to help evaluate any proposed increase or decrease.

Although hundreds of billions of additional federal dollars have been committed to home ownership via various bailouts (GSE's, TARP, passive loss tax breaks etc,) the mortgage interest and property tax deductions are the major ongoing federal expenditures for home ownership; they should therefore serve as a good long term benchmark to evaluate changes in the HUD budget (which primarily, but NOT exclusively focuses on rental assistance related costs).

Fortunately, the PEW Foundation has posted a new federal tax expenditure database. I was able to extract from it the projected costs of the mortgage interest and property tax deductions for 2011-2015 from two sources: the Joint Tax Committee and the Treasury Department.   

The table HERE presents the results of my analysis; some observations: 

1. In 2011 the combined cost of these tax deductions is estimated at $128 to $145 billion. 
2. In 2015 the cost of these tax deductions is estimated at $183 billion.
3. One year cost increases are estimated at 8.8% to 14.1%; 4 year cost increases are estimated at 42.9%.
4. One year cost increases are estimated between $12.7 and $18.1 billion;  4 year cost increases are estimated at $55 billion.     

Bottom line: One year growth restrictions in the 8-14% range for the HUD budget would keep it below the expected one year increase in federal costs for the mortgage interest and property tax deductions. 

Originally created and posted on the Oregon Housing Blog.