Originally published by American Thinker on February 17, 2026. 

There clearly is a housing crisis, and government policy is primarily to blame. Restrictive zoning and land-use regulations, costly environmental reviews, rent controls, distortionary tax code subsidies, and plenty more federal, state, and local policies all play a part. Nevertheless, a simple update to a neglected tax provision could make a big difference.

According to Harvard University’s Joint Center for Housing Studies, “home prices are up 60 percent since 2019 and the median existing single-family home price hit a new high of $412,500 in 2024.” In addition to insurance premiums rising, “property taxes also increased an average of 12 percent between 2021 and 2023.” Over the last 40 years, the median house price has increased from 3.6 times that of the median income to 5.3 times.

No wonder the median age of first-time home buyers reached a record high of 40 years old in 2025.

One partial solution would be to fix a provision of the tax code that is discouraging current homeowners from selling. Ryan Ellis, a leading expert in tax policy, explained the problem at National Review: “under current law, homeowners may exclude only $250,000 in capital gains if single, or $500,000 if married, when selling a primary residence. These limits were set during the Clinton administration in 1997 and have never been adjusted for inflation or for rising home values.”

Homeowners who want to sell now must determine if the tax hit is worth the sale, because the capital gains exclusion limits are too low for the modern economy.

Housing is hardly the only area harmed by capital gains taxes. After all, all capital gains taxes are double taxation, and the United States has one of the highest capital gains tax rates in the world. Lowering or abolishing those taxes would provide a huge boost to the American economy.

Double taxation on savings and investments diverts wealth and resources away from the productive sector of the economy and toward inefficient federal and state governments. Congress should consider any ideas that reduce or eliminate those punishing taxes that serve to hold back economic growth.

But the impact on housing is particularly acute. That’s why a bipartisan group of senators and representatives have crafted the “More Homes on the Market Act.” It would raise the exclusion of capital gains taxes to $500,000 for single filers and $1 million for joint filers. In a perfect world, capital gains double taxation would be abolished for homeowners, and everybody else, but this is a good step towards a rational tax policy that reduces artificial constraints on housing supply.

Senator John Cornyn (R-TX) argues that “an outdated tax code not only prevents the next generation from being able to afford a home, but it also prevents seniors seeking to downsize from selling theirs.” Sen. Michael Bennet (D-CO) argues, “seniors are struggling to sell their homes for fear of a massive tax bill.” When there is bipartisan agreement on lowering the burden of double taxation, Congress should embrace an across the aisle idea to allow Americans to keep more money out of the hands of federal bureaucrats.

When it comes time for seniors who no longer need as many bedrooms as those just starting a family, or who wish to find a home that demands less care and maintenance, to potentially downsize, they are understandably hesitant to take a massive blow to their net worth. As a matter of policy, we should want seniors to be able to downsize and use excess equity to support their retirement needs, all while allowing the next generation better access to homes that can accommodate growing families. It’s a true win-win.

Now is the time to take a hard look at ideas to grow the economy while expanding the supply of homes on the market for first time home buyers. With low approval ratings for both the president and Congress, and a midterm election on the horizon, it seems like an ideal time to start passing bills that are both popular and good policy. Congress should take this opportunity to reduce the burden of government taxes on an American populace struggling with government-created inflation and stagnating wages.