With median home prices exceeding $1 million in many U.S. housing markets, some real estate professionals are drawing attention to a 28-year-old capital gains tax law, citing it as one factor contributing to the nationwide housing shortage.

Ken DeLeon, founder of DeLeon Realty in Palo Alto, told The Epoch Times that some communities have experienced skyrocketing home price. In some cases they have jumped 667 percent on average since 1997.

“This outdated capital gains law has resulted in an artificially-created housing shortage,” DeLeon said. “A lot of older people who have lived in their homes for 30 years or more want to sell, but the value of those homes has tripled or quadrupled now. Some of these sellers could now be facing capital gains taxes of over $1 million.”

According to a HUD report, the median cost of a single-family home in 1997 was $143,000, compared with $414,000 in April 2025, as reported by the National Association of Realtors.

With the combined federal and state capital gains tax rate now at 37.1 percent in California, potential sellers seeking to avoid elevated tax exposure are choosing instead to remain in their current properties.

As a result, DeLeon said inventory levels have reached historic lows and sellers are stuck in a tax trap.

DeLeon contends that the economic ripple effects of the almost three-decade-old tax formula is causing not only fewer home sales, but less revenue from transfer taxes, reset property taxes, and local economic activity.

“We have older people who may have bought their home 30 years ago for less than $100,000 and now they’re worth $4 million,” she said. “They may want to downsize and move, but they can’t afford to pay all those capital gains taxes.”

The hefty tax makes it difficult to buy their next home for cash which they most likely want to do.

It’s a situation that is pushing our country further into a housing market where only large, wealthy corporations can purchase the increasingly rare single-family home.

A bipartisan effort to resolve the issue is already underway in Congress. Reps. Jimmy Panetta (D-Calif.) and Mike Kelly (R-Pa.), along with many others, in February reintroduced the More Homes on the Market Act to make housing more available and affordable for Americans.

The legislation would update the tax code by doubling the exclusion of capital gains from the sale of a principal residence. For single sellers, the exemption would move to $500,000 and for couples, to $1 million. The bill is designed to incentivize homeowners to sell their properties, thereby increasing the supply of housing and helping to alleviate affordability challenges across the country.

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