Home prices, particularly in high-cost areas, could decline 15 percent if President Bush’s tax reform panel’s expected recommendation to convert the mortgage interest deduction (MID) to a tax credit gets implemented, said Al Mansell, president of the National Association of Realtors.
Speaking at the opening session of the 2005 Realtors Conference & Expo in San Francisco, Mansell said that if the MID were changed, the typical homeowner could lose $20,000 to $30,000 in housing equity.
“Housing is the engine that drives this economy and to even mention reducing the tax benefits of home ownership could endanger property values. The tax deductibility of interest paid on mortgages is both a powerful incentive for home ownership and one of the simplest provisions in the tax code. It should not be targeted for change,” Mansell said. “NAR will continue to tell Congress that Realtors strongly oppose any attempts to alter the current tax treatment of mortgage interest.”
Eliminating the mortgage interest deduction would hurt middle-income families the most, he said. According to IRS tax return data from 2003, 52 percent of the families who claim the mortgage interest deduction have household incomes between $60,000 and $200,000.
The president’s tax reform panel will issue its proposals next week. It is expected to recommend converting the MID from a deduction to a tax credit; reducing the $1 million cap on mortgages to the local FHA loan limit (which can be as little as $170,000 and no more than $312,000 in high-cost areas such as Alaska, Hawaii, Guam or the Virgin Islands; the current cap has been in place since 1987); eliminating any deduction or credit for second homes; repealing the deduction for property taxes, as well as other state and local taxes; and raising the amount of gain to be excluded on sale of a principal residence, but reducing the frequency in which the exclusion can be taken.
“These proposals are startling,” Mansell told the gathering of several thousand Realtors. When a trial balloon was floated earlier this month, he said, “We communicated immediately with the chairs of the Tax Reform Panel and expressed our shock at their proposals.”
Mansell noted that both political parties have criticized the proposals. “But we cannot assume they will all go away. Tell your members of Congress not to alter the structure of mortgage tax deductibility. Together, Realtors will meet this challenge and ensure that housing remains strong – supporting our nation and its families for many years to come,” Mansell said.
Speaking at the same forum, NAR President-elect Tom Stevens passionately defended the NAR policy on Internet Listing Displays being challenged in a Department of Justice lawsuit. He said the lawsuit revolves around a single question: Who controls the Internet display of the listings that are shared through the Multiple Listing Service?
“Is it the broker who won the vigorous competition to obtain the listing? Or, is it anyone with a broker’s license who wants to make money off someone else’s hard work?” Stevens asked. “Listing brokers should have the right to decide where and how their listings are marketed. Period.”
Stevens said if the Justice Department wins its case, the MLS will become nothing short of a public utility. “That means every listing in the MLS could be used to attract consumers to Web sites that only sell leads and referrals back to active participants in real estate industry. Those businesses never contribute a single listing of their own to enrich the pool and do not intend to sell a property,” Stevens said.
“Turning the MLS into a public utility would be nothing short of a disaster – not just for Realtors, but for the entire real estate market. Without the MLS, smaller firms would be at an immense disadvantage and the entire real estate market would be less competitive and provide less choice to consumers – precisely the things the Justice Department espouses to protect,” Stevens said.
Stevens also told Realtors to write to their members of Congress to support legislation to enact small-business health plans that could impact Realtors and other small businesses for years to come. One bill has already been passed by the House, but similar measures are pending in Senate committees.
More than 26,000 Realtors are expected to attend the four-day conference, Oct. 28-31.
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