MONTEREY >> Bipartisan legislation that would update the tax code “to incentivize homeowners to sell their properties, increasing the housing supply and alleviating affordability challenges in communities across the country” has been reintroduced by a group of congress members including Rep. Jimmy Panetta, D-Carmel Valley.

The More Homes on the Market Act would make housing more available and affordable for Americans by raising the capital gains tax exclusion on the sale of a primary residence from $250,000 to $500,000 for single filers and from $500,000 to $1 million for joint filers, according to a press release from Panetta’s office. These thresholds, originally set in 1997, have never been adjusted for inflation, making it increasingly difficult for homeowners, especially seniors and middle-class families, to sell without facing significant tax burdens.

“As home prices rise and tax exemptions stay the same, homeowners feel financially locked into their homes and homebuyers feel locked out of the housing market,” said Panetta in the release. “By modernizing the capital gains exclusion, our bipartisan More Homes on the Market Act will enable more people to sell their homes, downsize if they choose, and retain the savings they’ve built over a lifetime. This commonsense fix will expand housing inventory, ease affordability challenges, and help more families achieve the dream of homeownership.”

Capital gains tax applies to the profit a home seller makes on their property.

The housing market has significantly evolved over the last few decades in Panetta’s 19th Congressional District which means that “many seniors who bought their houses decades ago, would likely be hit with high capital gains taxes if they were to sell now, reducing incentive for them to sell and limiting the housing supply,” according to Panetta’s office.

If a married couple bought a home in 2015 for $500,000 in an area that experienced tremendous growth with home values increasing significantly, and by 2022 sold the home for $1.2 million, the capital gains from the sale would have been $700,000, according to an example from Investopedia. As a married couple filing jointly, they would have been able to exclude $500,000 of the capital gains, leaving $200,000 subject to capital gains tax. Their combined income placed them in the 20% bracket, therefore, their capital gains tax was $40,000.

If the provisions of the More Homes on the Market Act were in effect, the couple in this example would have been able to exclude the full $700,000 in capital gains and not pay tax on the sale of the home.

Housing experts point to the outdated capital gains tax exclusion as a major contributor to the nation’s tight housing market, according to the release. In 2023, a report found 8% of U.S. home sellers made more than $500,000 in profit on their home sale, compared to just 1.3% in 2003. If the exclusion had been indexed to inflation, it would stand at approximately $500,000 for single filers and $1 million for joint filers today.

In January 2025, the median cost of a single-family home in Monterey County was $939,000 and sold in 22 days for 99% of the list price based on 129 sales during that month. Inventory was 391 up 6% from December and up 20% from January 2024.

Arguments against the legislation include lost tax revenue which could impact funding for other public service, a potential for housing speculation if homeowners see a higher tax break, an uncertain market impact as the increase in housing supply may not be enough to address affordability issues especially in high-cost areas, and it does not address new home construction or solving the housing shortage.

“It’s not just about fixing an outdated tax policy. It’s about freeing up homeowners options and creating more right-sized housing solutions.,” said Monterey County Association of Realtors Government and Community Affairs Director Adam Pinterits. “Many owners feel stuck in homes they have owned for years or raised families in.”

For example, Pinterits said, empty nesters may want to downsize, but are deterred from doing so because of how much they would lose in taxes. By fixing this deterrent to selling a home our communities can benefit from better housing availability while we wait for a permanent water supply solution to allow us to build adequate housing.

“Passing the More Homes on the Market Act is an important step toward addressing our housing crisis,” said Pinterits. “The Monterey County Association of Realtors and National Association of Realtors support the More Homes on the Market Act.”

U.S. Representatives Panetta (CA-19) and Mike Kelly (PA-16), along with Representatives Nicole Malliotakis (NY-11), Suzan DelBene (WA-01), Rudy Yakym (IN-02), and Lou Correa (CA-46), reintroduced the bipartisan More Homes on the Market Act to make housing more available and affordable for Americans.