The status of housing as the least-taxed investment in the United States, which has helped fuel an eight-year boom in real estate values, may be in jeopardy as a presidential commission considers changes to the federal tax code.

The panel, which is headed by former senators Connie Mack and John Breaux and to report to President Bush by Sept. 30, is studying options to lower taxes on many types of investments to meet Bush's goal of spurring savings and economic growth. Changes to housing-related tax incentives will also be considered, Jeffrey Kupfer, the panel's staff director, said in an interview.

Economists say such policies would have the effect of eroding the relative advantage housing has enjoyed over other investments since 1997, when Congress effectively made most sales of primary residences tax-free.

"One of the pillars of strength of the housing market is the fact of the tax-advantaged nature of the asset," said Anthony Chan, a senior economist with JPMorgan Asset Management Holdings Inc. in Columbus, Ohio. "To the extent that you chip away at that, you would see housing somewhat negatively impacted."

Fueled by both favorable tax-law changes and the lowest interest rates in 40 years, the national median home price has risen 69.3 percent since 1997. That year, Congress allowed homeowners to exclude up to $500,000 in gains when they sell homes they occupy, and eliminated rules requiring sellers to buy more expensive homes to avoid taxes. Before that, sellers faced taxes as high as 39.6 percent.

Suddenly, homeowners could sell highly appreciated property and do anything they wanted with the proceeds. Taxes on the sale of homes that aren't a primary residence also have been reduced twice since 1997 to rates as low as 5 percent.

The tax-free treatment of home sales made it easier for empty-nesters like Monica Anderson of Tallahassee to sell their homes and move to condominiums or rented apartments.

Anderson, 61, said the tax laws facilitated her recent decision to put the home in which she raised three children on the market. Anderson intends to bank the $250,000 profit and rent for a while in Washington to be closer to a young grandchild and another due to be born this week.

The state of the tax laws "makes it easier" to do that, Anderson said. "I don't have the concerns about it. I don't have to save all my receipts."

The 1997 tax changes even made divorce settlements less complicated, because estranged couples no longer face tax bills when they divide real estate.

The hot housing market has played a significant role in generating U.S. economic growth, economists said. Rasche and Howard J. Wall at the Federal Reserve Bank of St. Louis estimate that 22 percent of the 2.3 million jobs created since the end of the 2001 recession were linked to housing.

The 1997 changes "just released this tsunami of resources and wealth in the housing market," said Brian S. Wesbury, a former chief of staff for the congressional Joint Economic Committee and now chief investment strategist at Claymore Advisors LLC in Lisle, Ill. "I believe the tax catalyst has been essential and in fact we would not have had the housing boom of the last five years without the changes in 1997," Wesbury said in an interview.

In contrast, income from other forms of investment is taxed at higher rates, creating the relative advantage for housing.

Investment interest is taxed at rates as high as 35 percent; the rate on dividends was the same until it was reduced in 2003 to 15 percent.

It is this relative advantage for housing that may be called into question by the tax commission. Members have said at hearings that they are considering a wide range of ways to stimulate savings. The options range from cutting rates on dividends, interest and capital gains to streamlining current tax-free savings mechanisms for retirement, education and health care -- or even junking the income tax in favor of a system that taxes only consumption.

Tax commission member Bill Frenzel, a former U.S. representative from Minnesota, said panelists are wary of recommending any changes that may pop a real-estate bubble.

"We have to be careful, because tax bills have hurt markets in the past," he said in an interview. Bush, in his instructions to the tax panel, said that it should "recognize the importance of homeownership" in considering what changes to recommend.

The toughest issue to tackle may be the mortgage-interest deduction, which has long been viewed as politically sacred, former Treasury secretary James A. Baker III told the panel in March.

"This is a political exercise every bit as much as it is an economic exercise," he said.

David R. Kotok, chairman and chief investment officer at Cumberland Advisors Inc. in Vineland, N.J., agrees. ``It would take a lot of political force to get the Congress to pass a law that interferes with the housing structure, because there are so many millions of people who are invested in the current system," he said.

Former Treasury Department economist C. Eugene Steuerle said he doesn't believe that housing incentives, which are worth about $150 billion annually, are off-limits. "Politically, I think the case against making changes is exaggerated," Steuerle, now a senior fellow at the Urban Institute, a nonpartisan research organization based in Washington, said in an interview.

Linda Goold, tax counsel for the National Association of Realtors in Washington, said it's possible the tax panel may recommend replacing the interest deduction with a tax credit that would be more beneficial to lower-income Americans. They usually don't have enough deductions to justify itemizing them, a prerequisite for taking advantage of the mortgage-interest deduction.

While government studies show that 69 percent of Americans own their homes, only 33.6 percent of Americans itemize deductions, according to Internal Revenue Service data for 2003.

Changing to a tax credit would mean all homeowners with mortgages would benefit.

"It's not as draconian as repealing the mortgage interest deduction would be," Goold said. She said her group is studying the idea and wouldn't necessarily oppose it.

Jay Brinkmann, an economist at the Mortgage Bankers Association in Washington, said his group is analyzing a plan to convert the mortgage interest deduction into a credit and that it "might be acceptable" depending on the details.

The panel may also consider a recommendation by the congressional Joint Committee on Taxation to repeal the deduction for interest on home equity loans, Goold said. The panel's recommendations may include reducing the $1 million cap on which mortgages qualify for tax incentives, she said.

Panel member Bill Frenzel says colleagues will use caution.