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Homeownership Is Not a Tax Loophole

Written by on Monday, 20 May 2013 7:00 pm
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It has been said that Congress does two things well: Nothing and Overreacting. In an important sense, last week's message from Realtors® to their representatives in Washington was that legislators should do the former and not the latter.

The occasion was the midyear meetings of the National Association of Realtors® (NAR) in Washington, DC. Some 9,000 Realtors® gathered in the nation's capital both for meetings of the association's directors and also - primarily - for meetings with their federal legislative representatives. Realtors® from every region of the country participated in a well-organized, grass roots lobbying effort in prearranged meetings with their Senators and Congresspersons.

This year's lobbying agenda was something of a departure from the norm. Typically, when the Realtors® come to Washington, their advocacy discussions center around specific pieces of legislation that involve real estate. The issues in any given year may vary widely: flood insurance, low-income housing policy, HUD regulations, FHA loan limits, etc. This year, however, the agenda wasn't like that. There was no "please support this bill" or "we ask you to oppose that bill."

This year, as NAR's chief staff lobbyist, Jerry Giovaniello, put it, the Realtors® needed to be educational. This was for two reasons: First, Giovaniello noted the composition of the current Congress. During the past 6 years there has been a 43% turnover in the Senate. 80 members of the House have been there for less than three years. Many have never held public office before. In short, there are quite a few representatives who lack much experience dealing with real estate issues. Secondly, while there are no current pressing real estate issues in the legislative hopper, there is a lot of talk about large bills coming - mostly in the way of so-called fiscal or tax reform - that are liable to have significant impacts on the real estate market.

The mission given to the grass roots Realtor® lobbyists: Make sure that your legislator understands that some of the issues being discussed are of vital importance to a recovering but still fragile real estate market. Don't do anything to disturb that recovery, lest the overall economy comes unraveled again. Do no harm!

There were three general talking points:

  1. Preserve Homeownership Tax Policies
  2. Preserve the Mission and Purpose of FHA, and
  3. Restructure (but don't destroy) Fannie Mae and Freddie Mac so as to encourage the return of private capital to a stable and reliable secondary mortgage financing market.

There was no question but that, of the three general issues, the number one priority among the Realtors® was that tax policies favoring homeownership need to be preserved. Chief among those policies - and ones whose existence or present form seem to be under threat - are (i) the Mortgage Interest Deduction (MID), (ii) Preferential treatment of capital gains for sellers of a primary residence, and (iii) deductibility of local property taxes for federal income tax purposes.

"Reforming" the tax code is a big issue in Washington this year; and whatever is one person's preferred deduction is, in the eyes of another, it's a "loophole." Imagine, then, literally thousands of Realtors® on Capitol Hill, filling their legislator's offices, and wearing tags that said "Homeownership is not a Loophole". The message was clear. "Mortgage interest deductibility has been in the tax code since it was first adopted in 1913. It is used by more than 30 million homeowners. The MID has facilitated homeownership for millions of Americans for 100 years. Don't touch it. Do no harm. There are no bills yet that alters or eliminates it, but if/when one is introduced, you, Mr. or Ms. Legislator, know where our million-member organization stands. We will be watching."

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