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Testimony of the

American Homeowners Grassroots Alliance

Submitted to the



House Ways & Means Committee


Hearing on
Challenges Facing Middle Class Families

January 31, 2007
 


The American Homeowners Grassroots Alliance (AHGA) is a national consumer advocacy organization serving the nation’s 75 million homeowners. The Alliance thanks the House Ways and Means Committee Chairman Charles Rangel and the other committee members for holding this hearing on challenges facing middle class families. The financial wherewithal to own a home may be the best way to define membership in the middle class. Home ownership contributes significantly to our nation’s social stability, and home equity is the biggest source of saving for most homeowners.

The American home is becoming more important to our society. Increasingly homes are serving the much broader function they provided our forefathers. At its founding ours was an agrarian nation, and the workplace of homeowners was on their own property. Health care was provided by doctors at the patient’s home and nursing was provided by the patient’s family in the home. Most elder care was provided in the home by family members.
In many ways American homeowners are returning to this home-centric lifestyle. The number of home-based businesses is growing rapidly – some 10 million individuals earn a part time or full time living as eBay sellers. Teleworking is also rapidly growing in popularity as more employers, including the federal government, are facilitating the ability of employees to work from their homes either part or full time.

The trend towards a home-centric lifestyle is increasingly reflected in new home design and remodeling. More new homes are being built and existing homes remodeled with two home offices as well as floor plans and features that enable seniors with mobility challenges to age in place in their own home, rather than being forced to move to health care facilities. New wearable wireless medical monitoring devices now under development will also allow many of the nation’s 7 million chronically ill and many seniors with medical challenges to remain in their homes while their health can be monitored remotely 24/7 via computer modems.

These are important trends from many perspectives. Not only do they improve the quality of life and allow homeowners to better connect to their community, they also have other tangible benefits. A person who works at home does not need to commute to another workplace, which reduces demand for gasoline and global warming. By reducing the number of commuters, rush hour traffic in urban and suburban areas is also lessened. There will be fewer traffic jams and slowdowns for those who continue to commute to work, thereby reducing the gasoline consumption and air pollution from their vehicles and pressure on our transportation infrastructure. Federal and state government health care subsidies and medical insurance costs will also be reduced by homeowners who will be able to remain in their own homes rather than forced into the far more expensive alternative of moving to long term care facilities, hospitals, or other medical facilities.

The House Ways and Means Committee has already taken steps that both facilitate home based businesses and teleworkers and the reduction of home energy consumption. Recently enacted tax credits that encourage home energy efficiency and the construction of energy efficient new homes are helping the environment and saving homeowners money. The deductibility of private mortgage insurance will help more low and moderate income homeowners to afford to buy a home. We urge the committee to permanently extend these current laws.

Other legislation already under consideration in this new Congress will also help most homeowners. AHGA also supports the committee’s commitment to adjust and index the alternative minimum tax to exempt middle class homeowners. And the budget prudence reflected in Congressional “paygo” rules is also appreciated by American homeowners, who typically have no other choice but to pay as they go with the amount left over after their monthly mortgage payment. The amount left over is often insufficient to cover other substantial costs facing most homeowners, such as healthcare and college education for the homeowners’ children. For that reason we appreciate the committee’s support for reducing the cost of prescription drugs and the expansion of student loan programs.

More needs to be done however. The appreciation of homes in recent years has placed home ownership out of the reach of growing numbers of our citizens. We need to do more to get those at the lower end of the economic scale on the road to home ownership sooner. To expand home ownership we recommend that first time home buyers be allowed a tax credit of 10% of the home’s price, capped at $6,000. An affordable housing tax credit should also be enacted to create more homes for low income taxpayers and a national housing trust fund should be established to build rental housing for the lowest income families.

We also urge the committee to consider other steps to increase savings and/or home ownership in the U.S., such as modifying ERISA to permit investments by retirement plans in principal residences of children and grandchildren who are buying their first home, increasing IRA, 401K and other retirement savings plan contribution limits, and taxing annuity payments at the same rate as dividends.

Additional steps are needed to encourage the healthy migration back to a home-centric lifestyle. Health insurance is very expensive and is rising rapidly. We urge the committee to consider tax incentives to make health insurance less expensive for home based businesses and other homeowners who lack employer sponsored health care plans. Homeowners and/or their employers should be encouraged through additional tax incentives to invest in the technology used for the purpose of telecommuting. Telecommunications technology is also critical to teleworking and home based businesses. It is also a powerful research tool for students and a critical element for the implementation of future home-friendly medical technologies. We urge the committee to consider tax incentives that will facilitate faster and wider deployment of the ultra high speed broadband required to support many these applications, particularly to more rural communities and to the economically disadvantaged.

There are other important issues affecting homeowners and home ownership outside the scope of the Ways and Means Committee oversight, and we hope that committee members will support legislation in those areas as well. There is a need for Congress to step in to address serious barriers to competition and other problems in the real estate services sector, including real estate brokerage services, mortgage lending, and title and other insurance. There is a need to improve the protection of consumer privacy, particularly as it relates to technology, and to assure that homeowners and other consumers can fully benefit from technology’s increasingly important role in facilitating our nation’s return to a home-centric society. A greater commitment to energy research and tax incentives for clean energy will also benefit future generations of homeowners.

These and other issues that have significant economic impact on homeowners and home ownership are described in more detail in AHGA’s 2007 Issue Guide for Federal and State Policymakers, which is located at www.AmericanHomeowners.org. We again thank members of the committee for their commitment to address challenges affecting middle class families, and pledge our support for your worthy efforts.