The United States is in the midst of a severe housing market slump. Rising interest rates have forced many Americans to postpone home ownership – said to be one of the most cherished of accomplishments. The same problem is forcing many homeowners who have properties for sale to lower the price drastically. The number of Americans who are losing their homes in foreclosures is higher than it has been in decades. The Federal Reserve recently lowered the prime rate by one-half of one percent, trying to curb the number of loan applications being denied by lenders.

So how could things get any worse? Can you spell D-I-N-G-E-L-L? Representative John Dingell (R-Mich.) plans to introduce a bill that would eliminate interest-tax deductions for owners of what he calls “McMansions,” houses with more than 3,000 square feet. The reasoning behind Dingell’s proposed bill is that large houses use more energy and, by inference, anyone with a 3,000 square foot home is so rich than he doesn’t need a tax break.

The National Association of Home Builders was quick to rebut the senator’s conclusions. Home size, says the NAHB is not a true indicator of the amount of energy a given household uses. Large residences can use less energy than a smaller one if the homeowner takes advantage of various energy-saving alternatives such as energy-efficient heating, appliances, and other options, says the NAHB.

Dingell has not disclosed how he arrived at the 3,000 square foot cutoff, nor could The National Resources Defense Council, one of the most militant of the environmental groups. If 3,000 square feet of residential space translates into fat cat ownership, the inhabitants of many old farm houses will be hugely surprised. Kenneth Harney, writing in Realty Times, says nearly 10.5 million single family homes in the U.S. have more than 3,000 square feet. This represents nearly 30 percent of the total single family occupied homes in the U.S. In other words, bye bye to any mortgage tax deductions for one in three Americans.

Add to this the fact that there is no standard way of measuring the square footage of a given residence. Many measurements of a home’s square footage is often listed as “approximate” because there is no fixed standard in the real estate industry for determining a home’s size.

But to appreciate the disastrous nature of Dingell’s pending bill, one need only remember how close to the edge many Americas are in making monthly payments for mortgages, rent, auto payments, credit card debts and so on. Many homeowners have done careful and exact calculations to determine how much they can afford to pay each month for housing – and the interest rate deduction at the end of the year is a critical component of their reckoning.

Even with the recent reduction in the prime interest rate, the sale of new and existing homes is expected to decline well into 2008. Hence the outcry from realtors and others in the housing industry that this is an exceptionally bad time to tinker with the mortgage interest deduction.

Two years ago, a presidential panel advocated replacing the mortgage interest deductions with a straight 15 percent tax credit. That proposal was stillborn. So how then is Dingell’s plan such a real and present threat?

It should be remembered that, first and foremost, Dingell remains a very powerful member of Congress in his own right. He is chairman of the House Energy and Commerce Committee and has the zealous support of all the “green team” enthusiasts in his party. Also, by focusing on all those “rich” citizens who own a 3,000 square foot domicile, attention is diverted from the energy-swallowing U.S. auto industry, which is headquartered smack dab in the middle of Dingell’s Michigan district. The position enables Dingell, in the words of the Detroit Free Press, “to remain the auto industry’s staunchest defender in Washington, D.C. while maintaining a strong environmental record.” In America a man’s home may be his castle, but the fortress had better not exceed 3,000 square feet.

– Chase.Hamil

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