Should capital gains tax rules be modified to ease housing affordability?
It’s a fair question, and honestly, one a lot of buyers are starting to ask. The capital gains exclusion we use today was created back in 1997, giving homeowners a $250,000 exemption if single and $500,000 if married. It made perfect sense at the time. Homes were far cheaper, and most sellers never came close to hitting those limits.
But here’s the problem. Since 1997, home prices haven’t just crept up… they’ve skyrocketed. The median existing single‑family home price has risen from about $129,000 in 1997 to roughly $419,300 today — a 225% increase.
That massive jump means more long‑time owners now exceed the exclusion, which makes them hesitate to sell. And when fewer people sell, fewer homes hit the market. That’s a big reason inventory feels so tight for today’s buyers.
Now, there’s a proposal on the table — the More Homes on the Market Act — that would double the exclusion to $500,000 for single homeowners and $1 million for married couples.
Would that help? Absolutely. Here’s how:
- More homeowners could sell without a tax hit, especially folks who’ve owned their homes for decades.
- More inventory would open up, giving buyers more choices and easing bidding wars.
- Move‑up buyers, downsizers, and first‑timers all benefit when the market isn’t frozen by outdated tax rules.
Housing affordability isn’t just about building more homes. It’s also about freeing up the homes people already live in. Updating the capital gains exclusion to reflect today’s prices could help loosen the market and give buyers a fighting chance in a landscape where affordability feels increasingly out of reach.
If Congress adjusts these limits, it won’t magically fix the housing crisis — but it could remove one of the biggest bottlenecks keeping homes off the market. And for buyers trying to break in, that shift could make a real difference.