The More Homes on the Market Act is a federal bill intended to encourage longtime homeowners to move by reducing the capital gains tax they could owe when selling a primary residence.
Introduced by Representatives Jimmy Panetta (D-CA) and Mike Kelly (R-PA), the law would allow qualifying homeowners to exclude profit from a primary-home sale up to $500,000 for a single taxpayer and $1 million for a married couple filing jointly.
The current limits, $250,000 and $500,000, were set in 1997 and have never been reviewed for inflation. As home values rise, more people are facing the prospect of owing capital gains, even on average-priced homes.
This is hurting Baby Boomers who want to sell their homes.
Strong price increases have led to the condition where more American homeowners are getting ensnared in capital gains tax,” Lawrence Yun, chief economist at the National Association of Realtors, said of the problem.
“Elderly widows whose lives may improve from (moving) to a smaller size, they’re not selling because they don’t want to be hit with the capital gains tax.”
That’s keeping existing inventory from entering the market at a time when Americans are facing a housing crisis.
“Due to outdated limitations on home sale gain exclusions, homeowners who are looking to downsize are discouraged from selling their homes, which can stifle our real estate market and contribute to a lack of housing supply,” Rep. Panetta said in a statement.
Three House Democrats are backing the bill: Ryan Patrick (NY), Doris Matsui (CA), and Lateefah Simon (CA). In the Senate, David McCormick (R-PA) is the co-sponsor. A total of 151 House members and 23 Senators now support the bill across both arms of Congress.
The largest potential beneficiaries are homeowners with large accumulated equity, especially older homeowners who bought before the pandemic buying boom sent prices and housing wealth soaring.
The bill does not eliminate the eligibility requirements for the home-sale exclusion, such as generally having owned and used the property as a main home for at least two of the five years before the sale.