Both houses of Congress successfully passed the Republican tax reform plan, the largest set of changes to the tax code in a generation, and real estate is reacting. Prominent organizations and individuals in our industry are speaking out, and here’s a collection of what we’ve seen so far:
“The final tax reform bill is far from perfect, but it’s been greatly improved for homeowners over previous versions. Realtors should be proud of the good work they did to help get us here. We generated over 300,000 emails to members of Congress through two calls for action and held countless in-person meetings with legislators, all of which helped shape the final product.
“The results are mixed. We saved the exclusion for capital gains on the sale of a home and preserved the like-kind exchange for real property. Many agents and brokers who earn income as independent contractors or from pass-through businesses will also see a significant deduction on that business income.
“Despite these successes, we still have some hard work ahead of us. Significant legislative initiatives often require fixes to address unintended consequences, and this bill is no exception.
“The new tax regime will fundamentally alter the benefits of homeownership by nullifying incentives for individuals and families while keeping those incentives in place for large institutional investors. That should concern any middle-class family looking to claim their piece of the American Dream.
“Realtors’ work to help them get there will continue, and we look forward to joining members of Congress from both sides of the rotunda on that endeavor.” — NAR President Elizabeth Mendenhall
“While the impact of this bill may not be as harmful in many parts of the country, here in California where the typical home costs two and a half times the national home price, homeowners and would-be buyers will be hit especially hard. As we move forward and learn the true and full impact of this legislation, we hope we can work with Congress to make the necessary changes that will keep housing as the foundation of this great nation’s economy.
“We are disappointed that Congress has passed tax reform legislation that puts home values at risk and dramatically undercuts the incentive to own a home.
“For more than a century, American tax policy has recognized the value of homeownership to American middle-class wealth creation, strong and stable communities, and as a driver of our economy. Homeownership has been and will always be the foundation of opportunity for Americans across our great nation, and C.A.R. will not stop advocating for it.” — C.A.R. President Steve White
“There are changes to the income tax structure that will potentially have a significant impact on homeowners and the housing market. The first is the mortgage interest rate deduction which will be capped at $750,000 — down from $1,000,000. In theory this can be considered a tax on wealthy households, but there have been nearly 100,000 home sales this year where the mortgage loan was over $750,000 (almost 4% of total sales), so the effect will be felt more broadly.
“That said, this change will disproportionately affect high-cost markets in California, New York, and Hawaii, and to a somewhat lesser degree, it will also be felt in Seattle, and parts of Colorado and Arizona. The capping of the deduction for state and local property taxes (SALT) at $10,000 will also negatively impact states with high property taxes, such as California, New York, and New Hampshire.
“The final tax bill also eliminates the deduction for interest on home equity loans which is currently allowed on loans up to $100,000. This is significant because it will largely affect the growing number of homeowners who are choosing to remodel their home rather than try to find a new home in supply-starved markets like Seattle.
“While these measures will likely have a dampening effect on housing, I do not believe they will lead to a substantial drop in home values. However, there is a concern that it will lead to fewer home sales, as households choose to stay put so they can continue to take advantage of the current mortgage interest deduction. The result could be fewer listings, which could actually cause home prices to rise at above-average rates for a longer period of time.” — Windermere Real Estate Chief Economist Matthew Gardner
“The National Multifamily Housing Council and the National Apartment Association applaud Congress on the passage of tax reform legislation and are pleased that the priorities of the apartment housing industry were largely addressed in the final bill. This legislation will help the multifamily industry meet growing demand to build 4.6 million new units by 2030. As the focus now changes to implementation, NMHC/NAA will continue to analyze and assess the impact of specific provisions on the multifamily industry.”
We’ll add more as they roll in.