- Jeff Ostrowski Palm Beach Post Staff Writer
A tax bill making its way through the U.S. House of Representatives could slash Florida home values by 13 percent, Realtors said Monday.
Realtors harbor “grave concerns” about a Republican proposal to reduce the tax deduction for mortgage interest, end write-offs for property taxes and boost capital-gains taxes on home sales, said Maria Wells, president of Florida Realtors.
“That would affect the economy in all sorts of ways,” Wells said Monday during a news conference at the offices of the Realtors of the Palm Beaches and Greater Fort Lauderdale. “We know that housing is the canary in the coal mine.”
Proponents of the bill argue that less generous tax breaks for homeowners would be offset by a near doubling of the standard tax deduction, to $24,400 for married couples in 2018.
Realtors and many Democrats aren’t buying that argument. They say less generous tax incentives for homeownership could make homeownership less attractive both to first-time buyers and to second-home buyers.
“Most likely we are going to see a significant drop in the value of people’s homes,” said U.S. Rep. Lois Frankel, D-West Palm Beach. “Why? Because the demand for housing will go down.”
The House bill would allow home buyers taking out new mortgages to deduct interest on only $500,000 of debt, and only on one home. The package does not allow mortgage-interest deductions for second homes, or for home-equity loans.
Reflecting the mortgage interest deduction’s sacrosanct place in American politics, the Senate’s version of tax reform keeps deductions on a total of $1 million of loans on up to two homes.
In an era of rock-bottom mortgage rates, critics say the mortgage interest deduction is a benefit that accrues largely to the wealthy. But it’s a tax break that’s fiercely protected by the National Association of Realtors, a trade association with more than a million members and an active political action committee.
Both the House and Senate bills also would rein in the tax break on profits from home sales. Married sellers owe no capital gains taxes on $500,000 of profit on the sale of a primary residence, while single taxpayers can take a $250,000 profit tax-free. The new rules would require sellers to live in a house for five of the previous eight years, rather than two of the past five years, to receive the tax exemption.
The proposals also would end the practice of writing off local property taxes. Add it all up, Realtors say, and the tax proposals would discourage homeownership at a moment when the real estate market still is shaking off the Great Recession.
“We do not want to become a culture of renters,” Wells said. “We want to become a culture of homeowners.”
Some observers say Realtors are overplaying the effect of a less generous mortgage interest deduction. The median price of a house sold in Florida from July through September was $240,000, according to the Florida Realtors, so relatively few buyers in the state would be affected by a $500,000 limit on mortgage interest.
“For most people, this tax package isn’t going to have an impact,” said University of Central Florida economist Sean Snaith. “The primary driver of why people buy homes is not to get a deduction on your mortgage interest.”