The point of the home sale exclusion is to allow you to move. The presumption is that when you sell your primary, you are likely using the proceeds to buy another primary- which has probably gone up in value just as much as your old house.
Exploiting would be more like renting a house out for twenty years and then claiming it as your primary just long enough to sell & claim the exclusion, maybe without even renting out your original-primary.
The resident-renovator isn't something I worry about. You might be getting a tax break on your sweat equity but improving a house is hard work and when you run the numbers it's often not much more profitable than working a day job.
Exploiting would be more like renting a house out for twenty years and then claiming it as your primary just long enough to sell & claim the exclusion, maybe without even renting out your original-primary.
The resident-renovator isn't something I worry about. You might be getting a tax break on your sweat equity but improving a house is hard work and when you run the numbers it's often not much more profitable than working a day job.