WASHINGTON—An influential home builders group will oppose the House Republicans’ forthcoming tax bill, in a blow to the party’s attempt to forge unity among business sectors.

The National Association of Home Builders, which had expressed openness to changes in the mortgage interest deduction, decided it couldn’t back the GOP bill. The association’s leaders made the decision after top Republicans this weekend said they wouldn’t accept an idea home builders and lawmakers had been working on: repealing the deductions for mortgage interest and property taxes and replacing them with a new tax credit.

Instead, the bill will retain an itemized deduction for property taxes, the House Ways and Means Committee said late Saturday. That is a concession to lawmakers from high-tax states such as New York and New Jersey.

“It’s a bad bill for the housing sector,” Jerry Howard, CEO of the builders group, said in an interview on Saturday. “We will not be for it.”

House Republicans plan to release their tax bill on Wednesday. The tax legislation is the centerpiece of the GOP’s economic and political agenda, and many details have been closely guarded as lawmakers try to build a coalition to push it through the House before Thanksgiving.