Tax reform is great. Everybody loves lower taxes, right? Yet the proposals coming out of Washington, D.C., are bad news, plain and simple.
When it comes to residential real estate, the House and Senate bills as currently configured are brews of foul ideas that will inflict untold damage everywhere, but especially in states with sky-high housing costs, like California.
This is said not as a Republican or Democrat, uber-progressive or tea party loyalist. It is said with the conviction that if something is bad for owners, buyers and sellers then it’s bad for real estate and, as a result, bad for real estate professionals.
The details are still in flux, yet from what we know the tax bills are bad:
- For sellers—who may be unable to exempt capital gains when a house is sold.
- For buyers—who may be unable to deduct mortgage interest or moving expense.
- For homeowners—who could no longer deduct property taxes.
- For second-home owners—who may be restricted from deducting mortgage interest.
- For real estate professionals—who will have fewer people to assist because owners will have reasons to stay put and buyers will have even fewer chances to buy. Ironically, the relatively small tax cut that many middle-class homeowners could receive from current plans likely would vanish after just a few years. Indeed, after five years, it’s possible most middle-class families would see modest tax cuts transform to tax increases under the plan compared to current law.
Realtors do not believe vanishing tax cuts coupled with vanishing home equity is a formula for growing the economy.
Instead, Congress needs to create a bill that recognizes the importance of homeownership in the economy, and not try to ram through a bill that has seen minimal public debate.
As Congress continues its work, the housing policies that for generations put homeownership within reach of millions of Americans deserve full support from both sides of the aisle.
Take action now! Contact Congress now! Support housing!
Realtors urge Congress to support ownership
The California Association of Realtors in full-page open letter advertisements published Tuesday in multiple California major daily newspapers and national publications urged Congress not to hurt home ownership as it pursues tax reform.
“Congress is considering legislation that would punish homeowners, eliminate the financial benefits for homebuyers and leave hundreds of thousands of people across California much worse off than they are today,” said Steve White, C.A.R. president. “Tax reform shouldn’t hurt Californians, but this proposal does, in a big way. It eliminates important incentives that help first-time homebuyers and existing homeowners by capping the mortgage interest deduction and limiting property tax deductibility as well as capital gains exemptions. From the Oregon border south to San Diego, working Californians take a beating.”
The tax reform measure as currently proposed by the U.S. House of Representatives would reverse a century’s worth of tax policy that has recognized the value of homeownership.
“Homeownership is not a special interest, it is our common interest, yet this legislation would place the American Dream further out of reach for millions of Americans at a time when our homeownership rate is at a 50-year low,” Elizabeth Mendenhall, president of the National Association of Realtors, wrote in a letter to Congress. “In short, this bill is a serious step in the wrong direction.
“On behalf of the 1.3 million members of the National Association of Realtors, I want to express the Association’s strong opposition,” Mendenhall wrote. “NAR supports tax reform’s goal to spur greater economic growth, but Realtors believe this bill would push the housing sector—which represents a sixth of the economy—in the opposite direction.”
Marty Kovacs is the 2017 Chairman of the Santa Clarita Valley Division of the 9,800-member Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.