Congress baby boomer housing sell-off capital gains tax exclusion, Digi Mart USA News: The oldest Baby Boomers turn 80 this year, and the second-largest generation is set to drive a generational wealth transfer worth tens of trillions of dollars. Seniors are projected to deliver an average of 1.4 million homes to the market each year between 2026 and 2036.
That sell-off could help ease the current housing affordability crisis, which is fueled by a mismatch between supply and demand. Housing supply has been constrained by decades of chronic underbuilding and by homeowners who are locked into low mortgage interest rates.
Younger generations increasingly fear they will never be able to afford a home.
Columnist Patrice Onwuka, vice president for economic policy at Independent Women, argues that Congress could accelerate the process by updating the home sale exclusion levels from capital gains taxes on primary residences and indexing them for inflation. The column describes this as a possible priority for the lame-duck session.
According to Realtor.com’s Generational Housing Succession report, roughly 37 million homes are owned and occupied by Baby Boomers and the Silent Generation. About 38 percent of them are expected to reach the market as owners pass away or move into institutional facilities, rental properties, or the homes of relatives.
The coming wave is expected to be weighted toward larger homes, with seniors projected to hand off 9.9 million family-sized homes and 3.6 million large homes, but fewer than half a million starter homes.
The column notes that in 2024, 23 million renter households, about half of all renters, and 21 million homeowners, about a quarter, were housing-burdened, spending more than the recommended 30 percent of income on housing costs. Elevated inflation and energy prices have compounded the strain.
Onwuka also points to recent bipartisan housing reforms passed by Congress this summer, including the 21st Century ROAD to Housing Act, which the column calls only a down payment on lasting change. The column cites Texas, Washington, and Montana as states where deregulation has helped reduce housing costs, and it argues that state and local zoning, permitting, and environmental rules remain major obstacles to new construction.
The column argues that inflation has created a tax burden on homeowners. Median home prices have risen more than 90 percent over the past decades even though homes have not grown in square footage, and U.S.
home prices rose roughly 43 percent between March 2020 and June 2022. Homeowners can currently exclude up to $250,000 of gain for individuals and up to $500,000 for married couples filing jointly.
The column notes these levels were last updated under President Bill Clinton, when the average home price was about $154,000. According to the National Association of Realtors, roughly 34 percent of single homeowners and 10 percent of married homeowners exceed these caps.
The column supports the More Homes on the Market Act, which would double the exclusions to $500,000 for individuals and $1 million for married couples and add an annual inflation adjustment. Onwuka writes that this would reduce the lock-in effect, under which homeowners avoid selling because of the resulting tax bill, and would encourage Baby Boomers to sell family-sized homes sooner, benefiting Millennial and Gen Z buyers.
