As a real estate broker I’ve seen countless homeowners postpone selling a home, not because they didn’t want to move, but because they couldn’t afford the federal tax consequences. One of the biggest reasons is that the capital gains exclusion on the sale of a primary residence hasn’t been updated since 1997 — nearly 30 years ago.
Today, a married couple can exclude up to $500,000 in capital gains when selling their primary residence, while single homeowners can exclude up to $250,000. Those numbers may have seemed generous nearly three decades ago, but they no longer reflect the reality of today’s housing market.
That’s why I believe Congress should seriously consider passing the More Homes on the Market Act (H.R. 1340), legislation that would double the exclusion to $1 million for married couples and $500,000 for single homeowners while indexing those amounts to inflation going forward. And every elected official in San Diego should come together, regardless of party affiliation, and collectively lobby Congress to pass this important legislation.
Over the past 20 to 30 years, many homeowners in San Diego have seen their homes appreciate by well over $1 million. These aren’t necessarily wealthy investors. Many are retirees, teachers, firefighters, military families and middle-class homeowners who simply purchased a home decades ago and benefited from long-term appreciation. Unfortunately, many of these homeowners now feel trapped and will not sell, because of capital gains tax consequences.
I’ve spoken with clients who would love to downsize after their children have moved out. Others would like to relocate closer to grandchildren or move into a home that’s easier to maintain. Some need to sell because of health issues or retirement. Yet many hesitate because selling could trigger hundreds of thousands of dollars in federal capital gains taxes.
When people stay in homes longer than they otherwise would, it reduces the number of homes available for sale. That lack of inventory drives prices even higher and makes it even more difficult for first-time buyers and growing families to enter the market.
Increasing the capital gains exclusion won’t solve every housing problem in San Diego, but it could remove one significant barrier preventing many homeowners from selling. This proposal would benefit everyone involved in the housing market.
Longtime homeowners would have greater flexibility to move without facing a substantial tax burden. Growing families would see more existing homes become available. First-time buyers would benefit from increased inventory. Communities would experience greater housing mobility instead of neighborhoods filled with homeowners who feel financially locked into properties that no longer fit their needs.
Updating the exclusion is not a tax giveaway. It is an acknowledgment that the housing market has fundamentally changed over the past three decades. Congress periodically adjusts tax laws to account for inflation and changing economic conditions. The home sale exclusion should be no different. If lawmakers are serious about increasing housing inventory, improving affordability, and helping longtime homeowners move when life circumstances change, modernizing the capital gains exclusion deserves bipartisan support.
The More Homes on the Market Act is not a silver bullet for San Diego’s housing challenges. However, it represents a practical, common-sense reform that could unlock thousands of homes in high-appreciation communities while giving homeowners the freedom to make decisions based on their lives, not on outdated tax laws.
After nearly 30 years, Congress has an opportunity to replace an outdated tax policy with one that reflects today’s housing market. Modernizing the home sale capital gains exemption won’t solve San Diego’s housing crisis by itself, but it is a practical, bipartisan reform that could help put more homes on the market while giving homeowners the freedom to move when life changes.
San Diego’s housing challenges demand action, and our local elected leaders should speak with one unified voice in support of a commonsense reform that could help increase housing inventory and remove a significant financial barrier for longtime homeowners.
Mark Powell is a Licensed Real Estate Broker and a candidate for San Diego City Council in District 6.
