How does the federal government subsidize suburban sprawl?

The largest tax exemption the federal government gives out is the home sales tax exemption for up to $250,000 in capital gains for single filers and $500,000 in capital gains for joint filers. If a married couple earned $500,000 in compensation from their jobs they would pay an effective tax rate of 23% before any other deductions were made. If they made $500,000 in capital gains from selling any other asset they would pay 15–20% in capital gains taxes. But the government in its infinite wisdom has decided to encourage real estate speculation and penalize owning productive capital and wonders why fewer people in younger generations can afford to rent much less own a house outright. For the record, the federal government encouraging speculation isn’t new; they’ve been doing for the past 250 years originally through land grants. However, we’ve reached a point in our history where it is no longer sustainable under current population pressures. As Russ Roberts, an Israeli economist who hosts Econtalk btw, pointed out during the last housing market collapse, these generous tax exemptions for mostly unearned profits realized through circumstances homeowners themselves don’t create (i.e. the location value) were cemented through the 1997 Taxpayer Relief Act and was one of the factors that precipitated the late 90s to early 2000s housing bubble. Those other factors included the cheap credit being pumped out by the Fed, which also precipitated the pandemic speculative frenzy in housing, and FHA underwriting for subprime mortgages. As I’ve pointed out in prior posts most of the federal programs subsidizing suburban sprawl such as Freddie Mac, Federal Housing Admin, and Highway trust fund were created during the New Deal and Urban Renewal eras under the Admins of FDR, Truman and LBJ.