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August 30, 2014

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Steps to fixing the economy

Homeownership has long been a cornerstone of America’s growth and prosperity.

As a former member of the Nevada Senate, I am very concerned about the current state of our housing market in Nevada. Having worked during multiple legislative sessions on ways to steer our economy out of this historic slump, I have concluded that a true statewide economic recovery will not occur until our housing and construction markets begin to recover.

Congress has an opportunity to help stabilize and strengthen the economy with policies that preserve and promote homeownership. This can be achieved by taking action to preserve the mortgage-interest deduction for homeowners, stabilize interest rates and mortgage qualifying criteria for new homebuyers, and improve access to credit for homebuilders.

For nearly 100 years, the mortgage-interest deduction has been one of the primary tools to help responsible homeowners keep their homes. It is also a significant factor in determining whether to make the long-term investment of purchasing a home. Preserving the deduction for homeowners is a key element to sustaining our economic recovery, yet it is under attack by some in Congress who seem determined to undermine homeownership and take direct aim at the American homeowner rather than make tough decisions elsewhere. Homeownership promotes stable communities that foster economic growth and sustain families. As the foreclosure crisis continues, attacking the mortgage-interest deduction will further weaken an already fragile housing market here in Nevada and across our nation.

Preserving access to affordable mortgages for new homebuyers is equally important. The housing crisis has appropriately led to calls for reforms to mortgage-lending policies. However, changes that go too far — such as overly strict government-mandated lending criteria or high mandatory down payments — may have the unintended effect of keeping many would-be homebuyers from pursuing plans to purchase a home. A primary goal of reforms to Fannie Mae and Freddie Mac should be to maintain the availability and affordability of 30-year, long-term, fixed-rate mortgages for homebuyers.

Finally, homebuilders need the support of Congress to improve the flow of credit for home construction. The homebuilding industry nationally — and especially in Nevada — has been hit hard by the economic downturn and housing crisis. As the economy begins to improve and demand for housing begins to show signs of recovery, homebuilders need help with access to affordable construction loans. The Home Construction Lending Regulatory Improvement Act of 2011 offers critical assistance to help reestablish and improve the flow of credit to homebuilders that will help them build homes and create jobs.

Taken together, the three items above will do much to support our economic recovery. Protecting current homeowners by maintaining the mortgage-interest deduction will stabilize our communities. Promoting homeownership for first-time or new homebuyers by securing the availability of affordable long-term, 30-year, fixed-rate mortgages will add to our economic recovery. And increasing the availability of credit to our nation’s homebuilders will strengthen our economy, create more jobs, and preserve the cornerstone of the American dream: homeownership.

I believe these issues are essential to our continued economic recovery across the country and right here at home in Nevada.

Warren B. Hardy II is a former state senator and former president of Associated Builders and Contractors in Nevada. He continues to work with the group as a consultant.

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  1. I disagree with Mr. Hardy's assumption that a mortgage interest deduction is a good thing. It penalizes those taxpayers that only rent, own their home outright and in today's world is only a deduction when all your income tax deductions exceed the standard federal income tax deduction. At the high end it has been an abuse allowing the rich to deduct the interest paid on their primary and secondary homes. On the low end it is a sales tool used to convince marginally qualified buyers to purchase homes when they really should not have. Home ownership has in the past been a good way for lower income people to build equity and save for their retirement. Perhaps it will still be in the future but Americans need to take more ownership up front. Learning to save for that 20% down payment, like many homeowners did in the distant past, is one way to teach thrift. If only our schools taught this lesson.

  2. This letter makes no sense. The average home price in Las Vegas is about $115,000, with a 15% downpayment the mortgage would be $100,000, and at 4% the payment around $477. The total interest paid would be around $5000. The standard deduction is $11,600 for a married couple meaning the home interest deduction is useless, they are better off with the standard deduction. Relaxing the underwriting rules? That is what caused the problem in the first place! Interest rates are very low, home prices very low so credit worthy home shoppers have a great opportunity now. I have stated my idea of resetting underwater mortgages to 40 year term at current rates and be able to transfer balance to another home would result in a far better financial home ownership system at no real cost to taxpers.