This rethinking was sparked again by Thomas Frank's "Let them eat McMansions!" article where he claims that "we have sprawl, wars over cheap gas, stagnant wages and longer hours because your boss wants this awful, ugly house." Heh. Beyond the snickering, however, is a darker truth: these ugly opulent houses are damaging to our social fabric. Frank provides plenty of examples in the article, but on tax day, this was the most interesting fact to ponder: what sparked the McMansion trend in the first place? A: Our tax policy!
There have always been grand houses in America. What put them into mass-production in the mid-’80s? The most obvious answer is that decade’s transfer of wealth to professionals and managers, a shift made possible by the top-bracket tax cuts of 1981. Where corporate earnings had previously been spent on skyscrapers and company planes, it now poured into the personal bank accounts of executives. Tax policy then steered those executives’ spending toward residential real estate. According to James K. Galbraith, “The 1986 Tax Reform Act removed the deductibility of non-mortgage interest,” leaving mortgage interest as the only remaining deductible type and thus “creating a powerful incentive for households to try to own their own homes.”Essentially, those with extra money look to take advantage of a legal tax haven by sinking more and more of it into ever growing houses. And so this is what the market provides! I'm actually in the market for a house right now - a "mid-level home," meaning ~2000 square feet, with 3-4 bedrooms and a half-acre or so of land. It's shocking how few new houses meet these specifications.