Amherst Research's Chief Economist, Sarah Dobson, has labeled former President Donald Trump’s recently announced housing initiative as 'patently wrong,' citing potential distortions to the mortgage market and increased financial instability. The policy, which proposes eliminating mortgage interest deductions for properties valued above $1 million, is expected to affect 1.2 million households and reduce federal revenue by $22 billion annually.
- Proposed elimination of mortgage interest deduction for homes over $1M affects 1.2 million households
- Expected federal revenue gain: $22 billion annually
- Projected 8.5% decline in high-end home prices within three years
- S&P 500 Financials Index fell 1.7% on policy announcement
- AGNC and NLY stocks dropped 5.3% and 4.8% respectively
- Modeling indicates 14% increase in barriers to homeownership for first-time buyers in high-cost areas
Sarah Dobson, Chief Economist at Amherst Research, has issued a stark critique of a newly proposed housing policy attributed to Donald Trump, calling it fundamentally flawed from both economic and market stability perspectives. The plan, leaked in early January 2026, would eliminate the mortgage interest deduction for homes valued above $1 million, targeting high-end real estate owners while preserving the credit for lower-priced properties. Dobson argues that such a targeted tax change would create unintended consequences across the housing sector, particularly in metropolitan areas with high property values like New York, San Francisco, and Miami. The proposed policy, if enacted, would impact approximately 1.2 million homeowners, representing 3.8% of all mortgage holders in the U.S. According to Amherst's modeling, the change could reduce home prices in premium markets by 8.5% over three years, while triggering a 4.2% decline in transaction volumes. Federal revenue is projected to increase by $22 billion annually, but Dobson warns that the short-term gains may be offset by long-term risks, including reduced liquidity in mortgage-backed securities and increased refinancing pressure on middle-income borrowers. Market participants reacted swiftly, with the S&P 500 Financials Index dropping 1.7% on the day following the announcement, and mortgage REITs such as AGNC Investment Corp. (AGNC) and Annaly Capital Management (NLY) experiencing a 5.3% and 4.8% decline, respectively. The move also spurred renewed debate about tax equity and wealth distribution, with policymakers in both major parties expressing concern over the potential for market fragmentation. Amherst’s analysis suggests that the policy could disproportionately affect first-time buyers in high-cost regions, increasing barriers to entry by 14% over the next two years.