This year is shaping up as one of the most consequential for real estate in decades. Having open lines of communication with lawmakers and regulators will be critical, says National Association of REALTORS® CEO Dale Stinton. He and Chief Lobbyist Jerry Giovaniello have spent years cultivating good working relationships with members of Congress and the regulatory agencies. In May, they’ll join thousands of REALTORS® for NAR’s annual Capitol Hill visits, where they’ll talk directly with lawmakers and their aides about these key issues.
Tax reform. In the U.S. House, lawmakers are considering the outlines of a “blueprint” to overhaul the tax code. Although the blueprint leaves the mortgage interest deduction in place, many homeowners would lose the incentive to take it because the proposed measures would eliminate the deduction for property taxes and nearly double the standard deduction. Only the wealthiest households would itemize, so owning would essentially be no different than renting from a tax perspective. Lawmakers are also talking about doing away with or limiting 1031 tax-deferred like-kind exchanges—which allow investors to defer paying capital gains taxes when they reinvest proceeds from a sale in a similar property. The provision has been a cornerstone of commercial real estate since it was written into the tax code in 1921.
Housing finance reform. The debate will be over continued federal backing of conventional loans sold to investors. Without the government guarantee, 30-year fixed-rate mortgages will likely require larger down payments and have higher interest rates, and their availability may be in jeopardy.
Health insurance reform. Efforts to repeal and replace the Affordable Care Act are underway. Small businesses and independent contractors have long faced challenges obtaining adequate coverage at affordable rates. Concerns abound about whether a replacement would ensure coverage for all at a reasonable cost.
Flood insurance reauthorization. The National Flood Insurance Program expires at the end of September. Without reauthorization, the availability of flood insurance could be disrupted, leaving thousands of transactions a day unable to close.
Deregulation. In a potentially positive change, reserve and reporting requirements constraining construction and commercial lending by community banks under Dodd-Frank, the banking reform law enacted in 2010, could ease. Rules pertaining to the environment could ease as well.
Association leaders and staff meet regularly with lawmakers to explore policy solutions. In February, -at a federal policy conference in Washington, D.C., REALTORS® shared their input on tax reform with U.S. Rep. Kevin Brady (R-Texas), chair of the House Ways & Means Committee, and Rep. Peter Roskam (R-Ill.), chair of the committee’s tax policy subcommittee, Also at the forum were staff aides from the House Financial Services and Senate Banking committees, whose members are working on proposals for reforming or replacing the secondary mortgage market companies Fannie Mae and Freddie Mac and for revamping the FHA. “We’re at a potential crossroads this year,” says NAR President William E. Brown. “Are we going to be a nation of owners or renters? Will commercial real estate stay within reach of small investors? We’ve made a great start in our effort to educate lawmakers, but it’s just a start. More than ever, REALTORS® need to step up and stay engaged.”
“We haven’t seen a complete picture of the numbers under the tax reform blueprint. Lawmakers are talking about this theoretically. In reality, taxes rarely go down. They say they want to broaden the base and lower the rates, but I can see tax rates going up again after they’ve been lowered and after we’ve already given up the property tax deduction and allowed the mortgage interest deduction to be weakened.”
Sears Real Estate, Springfield, Mass., NAR vice president of government affairs
“The government thinks it’s losing $15 billion in write-offs every year from everyone trading up, but they’re not going to bring any of that tax revenue back if they eliminate like-kind exchanges. People will simply stop selling. You also hear the argument that it’s a tax break for the rich, but exchange accommodators say the majority of business is from mom-and-pop owners selling four-plexes, six-plexes, or 10-unit buildings. Getting rid of 1031 exchanges isn’t just a deferred-tax issue; it’s about job creation. People use the provision to expand their business and upgrade their holdings so they can hire more people.”
—William E. Brown
Investment Real Estate, Oakland, Calif., NAR president
“There have been many years I’ve gone without health insurance. It was pay as you go, and I know I’m not alone in this. We’re hanging on by the skin of our teeth, hoping we don’t get sick or have an accident. What insurance is available is expensive. Until you get your business off the ground, you can’t afford to pay the premiums. Meanwhile, we’re trying to attract millennials to our profession. Our average age is [in the] mid-50s. What incentive do young people have to be the next wave of entrepreneurs in our industry if they can’t count on having health insurance available to them at a cost they can afford?”
—Brenda Small BPOR, GRI
Keller Williams Capital Properties, Washington, D.C., NAR committee liaison, Public & Federal Issues
“NAR supports reauthorization of the National Flood Insurance Program and reforms to encourage a more robust private coverage market. We have Chubb here in New Jersey, which tends to provide blanket policies for higher-end homes. We need to expand access to coverage and reauthorize the federal program so our buyers and homeowners can access insurance in all markets at all times.”
—Charles Oppler AHWD
Prominent Properties Sotheby’s International Realty, Franklin Lakes, N.J., REALTOR® Party director
“Community banks really do serve a purpose. They’re the lenders that do new construction for builders and buyers. They’re the ones that lend to the mom and pops that take equity out of their homes to open storefronts. But that’s all changed. Restrictions have become so tight, the relationships local lenders might have with people, knowing them and knowing they always pay their loans back, those are often no longer clients the bank can help because of new reserve and other requirements that were put in place.”
—Carol Griffith GRI
Griffith Realty, Brighton, Mich., NAR committee liaison, REALTOR® Party Disbursement