Eliminating a big chunk of that deduction could help free up billions of dollars, estimates Lazio, part of which could be used to fund Low- Income Housing Tax Credits. But previous suggestions to change or eliminate the mortgage interest deduction have been met with stiff opposition from the housing lobby.
It might take more comprehensive tax reform to see a better allocation of resources to affordable housing.
Still, Congress might actually make more progress focusing on affordable housing than it has in designing the future of the mortgage market.
Determining the role of the government in housing and whether or not there should be a government guarantee is likely to be lost in an ideological battle. But almost everyone is in agreement that the country's poorest households need public assistance to find housing. So that is one less battle to fight.
-- Written by Shanthi Bharatwaj in New York.