House Republicans released their latest tax reform bill that some experts are saying could pass through Congress as early as Christmas this year.

Although the Tax Cuts and Jobs Act is still in the preliminary stages, it is already threatening several programs in the housing industry including the mortgage interest deduction.

The tax plan also decreases the capital gains tax for many homeowners, as they will only be able to utilize the tax once every five years instead of two. Read more about the changes in the capital gains tax here.

Due to the new change, homeowners in the most appreciating markets will be much less motivated to sell, as they may have to pay tax on the profits they make on their home.

So quickly appreciating markets in California such as San Francisco, the Northeast like Boston or even in the South in metros such as Dallas, current homeowners may be much less motivate to sell.

What’s more, for higher income earners this deduction will fall off entirely for high income earners. From the plan:

If the average modified adjusted gross income of the taxpayer for the taxable year and the two preceding taxable years exceeds $250,000 (twice such amount in the case of a joint return), the amount which would (but for this sub-section) be excluded from gross income under subsection (a) for such taxable year shall be reduced (but not below zero) by the amount of such excess.

The section of the tax plan, if passed, would take effect starting in January 2018.

And when they go to buy new homes, these high income earners, or even median income earners in some metros, will most likely not qualify for the mortgage interest deduction on their next home, as the new tax plan cuts the deduction from $1 million to just $500,000.

CoreLogic’s data showed only about 2.8% of all active loans are above $500,000, however the map below, which we created using data provided by CoreLogic, shows they all clustered in certain areas across the U.S.

However, other data sources show the total share of loans originated in 2017 is even higher at 5.4%.

“Out of all loans originated this year nationwide, 5.4% were more than $500,000,” said Daren Bloomquist, ATTOM Data Solutions senior vice president. “The District of Columbia will be affected the most with 35.1% of loans in 2017 being over $500,000. This is followed by Hawaii, 15.1%, California, 11.5%, Delaware, 9.3%, Massachusetts, 9.1% and Washington, 9.1%.”

The Federal Housing Finance Agency's interactive map shows that in some areas, even the conforming loan limits can surpass $500,000. 

Due to the lack of incentives to buy a new home, and the decrease in the capital gains deduction, this could create inventory shortages in already struggling markets.

“The housing industry is the foundation of our economy and this tax reform proposal would be detrimental to the affordable housing community,” said Jonathan Paine, National Association of Local Housing Finance Agencies executive director. “We urge policymakers to think twice before voting on the tax reform proposal and commit to protecting these invaluable programs that are so critical to providing affordable housing to so many that desperately need it.”