UpTrajectory Review

Two bills circulating in Congress, both called the More Homes on the Market Act, would double the capital gains exclusion on primary home sales from $250,000 to $500,000 for single filers and from $500,000 to $1 million for married couples. The current thresholds have been frozen since 1997, even as home values have roughly tripled. The National Association of Realtors estimates that about one-third of homeowners already hold more equity than the single-filer limit allows, a figure projected to hit 56% by 2030. The House and Senate versions differ only in how they index for inflation, and bipartisan co-sponsorship last week pushed support to roughly one-third of Congress.

For New Jersey small business owners, this is not abstract tax policy. The state has some of the nation's highest property values and longest-tenured homeowners, many of whom are also business operators or landlords with capital tied up in appreciated real estate. A typical boomer who bought a Summit or Montclair home in the 1990s for $300,000 and could sell for $900,000 today faces a $150,000 federal tax hit under current law, enough to freeze a decision for years. Unlocking that inventory matters doubly here: it frees up housing stock for younger workers your business needs to hire, and it may finally let aging owners convert dead equity into operating capital, succession funds, or retirement liquidity without a punitive bite.

What is genuinely new is the momentum, not the idea. Versions of this have floated for years, but the June housing bill and sustained affordability pressure have created unusual bipartisan oxygen. We are skeptical of the bill's core premise, however. The assumption that tax relief will meaningfully increase supply rather than simply inflate seller proceeds is untested. The 1997 exclusion itself helped drive the home-as-investment mentality that contributed to the housing crisis. And the bills do nothing for the construction side, zoning reform, or rental supply. The NAR's equity statistics, while striking, also reflect that many of these gains are paper wealth in markets where any replacement purchase would absorb equivalent or greater cost.

The distributional effects deserve sharper scrutiny than the source provides. This policy rewards the already-asset-rich, disproportionately white and older homeowners in high-appreciation markets, while doing nothing for renters or recent buyers who missed the appreciation wave. Small business owners who rent their premises or homes see no benefit. Meanwhile, a sudden inventory surge could depress local prices, hurting recent buyers and leveraged landlords. The inflation-adjustment difference between the House and Senate versions is technically minor but politically telling: one version would let future Congresses avoid hard votes by automatic indexing, the other preserves legislative leverage.

Watch whether this attaches to must-pass legislation in the fall or gets stripped in reconciliation. The one-third support figure sounds impressive but remains well short of passage, and housing bills have a history of dying in committee. For operators, the actionable move is to identify whether your own housing situation or that of key employees would be affected, and to model scenarios now rather than react if a late-year tax change passes retroactively. If you have aging parents or partners sitting on appreciated homes, the planning window may be opening. But do not bank on price relief: if this passes, the more likely near-term effect is more transactions at sustained or higher prices, not cheaper housing for your workforce.

The real test will be whether Congress pairs this with supply-side measures or merely repeats the pattern of subsidizing demand while constraining construction. New Jersey's small business community should press state and federal representatives for that linkage, not just the exclusion itself. Housing affordability is a competitiveness issue for employers here; a tax break for sellers without attendant building reform is at best a partial and potentially inflationary remedy.

“That section of the tax code has not been updated since 1997, even though home prices have roughly tripled over that time.” — Fast Company

Takeaway: Model your capital gains exposure now if you or key employees own appreciated homes, but do not count on this bill to lower housing costs for your workforce.