The Tax Cuts and Jobs Act, H.R. 1, has the potential to erode the financial power of homeowners
The National Association of Realtors® (NAR) is the largest trade organization in the U.S. dedicated to advocating for the residential and commercial real estate industries. NAR opposes the new Tax Cuts and Jobs Act because, “…this bill will diminish the opportunity for homeownership for millions of middle-class families.” NAR has issued a call for action, asking members to contact their congressional representatives, voice opposition to this bill, and warn about how it threatens the real estate industry.
Rather than read the entire bill, save time by reviewing the section-by-section summary on the Ways and Means Committee website HERE. Once you have read the summary, please reach out to the legislator for your district to express your concerns about this bill, and its impact on homeownership among middle class Americans. If you are a REALTOR®, REALTIST® or work in the U.S. real estate industry in any capacity, speak out, and hold your lawmakers accountable for decisions that could have major impacts on homeownership, and the real estate profession.
One impact on the real estate industry will be the bill’s affect on a home seller’s equity and retirement goals. For many homeowners, real estate property is their single most important and valuable asset, making up the majority of their net worth. For current and future homeowners, the major concern is the threat of removing tax deductions on home mortgage loans. The congressional tax reform proposal could erode the fundamental dream of homeownership in California and other states where Median Home Prices and loan amounts exceed the $500,000 allowable deduction on new mortgage debt.
Without the mortgage deduction incentive, many people will choose renting versus buying. While renting is a viable option, it’s homeownership that builds long term wealth for most Americans.
To quote Iona Harrison, chair of NAR’s Federal Taxation Committee, who has testified on behalf of NAR on Capitol Hill regarding tax reform and homeownership, “…an analysis by the committee showed that under the GOP tax proposal, homeowner households with $50,000 to $200,000 in annual income would pay $815 more in taxes per year,” says Harrison. “Coupled with the proposed elimination of other itemized deductions, the tax plan could spur a housing downturn if enacted.”
“The bottom line is removing tax incentives means fewer home buyers and lower home values.”
Will The Tax Cuts and Jobs Act really make homeowning unaffordable?
One of the points of view I’ve read contrary to the NAR argument is an article on Forbes.com by Jeff Dorfman, a professor of economics at The University of Georgia:
“Housing is not being made unaffordable by the proposed tax reform since the vast majority of Americans will receive a moderate tax cut under the plan. Home builders and realtors seem concerned that a few rich Americans might not buy as expensive houses without as big a tax break, even though they will have more disposable income. I think they are wrong. Americans, particularly higher-income ones, like to buy stuff, especially expensive stuff, and will likely continue to buy expensive houses. If there is some adjustment in home buying demand on the higher end, high-end home builders can build more homes that are slightly less expensive. The world is not ending.”
Get educated, and make your opinion known
I implore you to do your due diligence regarding this bill and step up to protect California homeownership rights. Even someone who is not yet a homeowner should be concerned about the loss of financial benefits to homeownership, and the about the effect on business enterprise interest.
Perhaps in other states, where median home prices are much lower, this reform might make sense. But, by no means are Californians who can afford loans of $500K or more, considered rich! This will have deep impacts on the middle/working class in California.
Be informed, do your homework, and act now by expressing to your member of Congress what you think of this bill, and it’s impact on Californians.