The Market Institute and the Center for a Free Economy (CFE) led a coalition of free-market leaders and organizations urging congressional leadership to pass the More Homes on the Market Act (H.R. 1340 / S. 3332)—a bipartisan reform designed to increase housing supply and improve affordability for American families.
In a letter sent to Speaker of the House Mike Johnson and Senate Majority Leader John Thune, the coalition calls on Congress to address a major but often overlooked driver of today’s housing affordability crisis: an outdated tax rule that discourages homeowners from selling their homes.
An Inflation Problem in the Tax Code
Under current law, homeowners may exclude up to $250,000 in capital gains from the sale of a principal residence, or $500,000 for married couples filing jointly. Those thresholds were established in 1997 and have never been adjusted for inflation.
As the coalition letter explains:
“In far too many cases, Americans who bought decades ago now face taxes on what are often merely inflationary capital gains. That tax burden discourages home sales, tightens housing supply, and makes it harder for Millennial families to buy the family homes they need.”
Because the exclusion has remained unchanged for nearly three decades, its real value has eroded significantly as home prices, wages, and the cost of living have increased.
The Housing “Lock-In” Effect
This outdated tax policy creates a powerful “lock-in” effect. Many homeowners who purchased homes years ago face a substantial tax bill if they sell, even when much of the gain is simply inflation.
As the letter notes:
“More middle-class homeowners now face a real tax penalty if they sell and move. This ‘lock-in’ effect reduces the number of existing homes available for sale and worsens today’s inventory shortage.”
When homeowners delay selling to avoid taxes, fewer homes come onto the market, supply tightens, and housing prices rise—making it harder for younger families to purchase homes.
A Simple Bipartisan Reform
The More Homes on the Market Act would address the problem by restoring the real value of the capital gains exclusion and indexing it for inflation going forward.
According to the coalition:
“H.R. 1340 and S. 3332 would fix this problem directly by restoring the real original value of the exclusion and ensuring it keeps pace with inflation going forward.”
By reducing the tax penalty associated with selling a home, the reform would help increase housing supply, encourage normal market turnover, and expand homeownership opportunities for younger Americans.
Time for Congress to Act
Housing affordability remains a top economic concern for American families. While policymakers often focus on mortgage rates or zoning regulations, the federal tax code also plays a major role in shaping housing supply.
Updating the capital gains exclusion to reflect inflation would reduce the tax penalty on mobility, bring more homes onto the market, and help more families achieve the American dream of homeownership.
The coalition urges Congress to move forward with the More Homes on the Market Act and give this bipartisan, commonsense reform a vote.
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