Save the dream of homeownership for the middle class, allow capital loss on sale of a primary residence to reduce taxes.

The housing crisis has been addressed through deals with the banks, ignoring the plight of the average joe and jane homeowner, who find themselves severely penalized by the irresponsible lending policies of these same banks.
When a family has to take a significant loss on the sale of their primary residence it can be a crippling financial burden. Not only may they become homeless but they may have lost their retirement nest egg. My proposal would ease this burden by allowing such loses to offset income and therefore tax liability in these cases.
Losses applied to tax reduction could be limited to $500,000 adjusted for inflation, and spread over 5 years. This would put the relief where it is needed and directly impact those who need it most.