EFTA00307747.pdf

TALKING POINTS antrum 111 114 Tax Reform finding they owe more than what their home is worth. For many, this will Congressional Action Needed lead to defaults. foreclosures or short sales, creating havoc for families. • Congressional Republicans have promised the first comprehensive tax reform neighborhoods and communities. bill in more than 30 years. — The home is the most valuable asset for most owners. Millions of families • Members of Congress and their staffs need to be reminded that tax reform have built equity for years with the hope of using it to help pay for muse not dilute the current real estate tax provisions vital to the housing retirement or college for children. Many of these dreams would evaporate. market and the economy. • Like-Kind Exchanges Must Be Preserved Reform ideas that repeal or weaken tax incentives to encourage homeownership — The Section 1031 provision encourages growth by permitting real estate must be rejected. We need tax reform, but it must first do no harm. held for investment to be exchanged for property of a like kind on a tax-deferred basis. Congressional Actions To Date — Exchanges are essential to the commercial real estate sector and to the • No tax reform legislation has been introduced in the current Congress. economy. • "fax reform proposals discussed to date would lower tax rates and raise the Issue Background standard deduction but would pay for these changes by scaling back existing real estate tax provisions. Since its inception, our income tax system has recognized the favorable effects of homeownership for families, communities and society by incentivizing • Proposals that limit itemized deductions—even ifnot direaly changing rules homebuyers with tax benefits. The result is a home-owning society that is the applicable to mortgage interest —could have serious negative consequences envy of the world. However, tax reform plans now being discussed threaten to for homeowners. decimate or even wipe out the tax benefits of owning a home for 95 percent of American families. In addition to almost doubling the standard deduction, What To Tell Your Representatives And Senators these plans would outright repeal the deduction for property taxes while gutting Homeowners Must Be Treated Fairly in Tax Reform the Mortgage Interest Deduction (MID) for all but the richest. Ironically, a — Middle-income homeowners could be worse offunder proposals that limit hollow shell of the MID would stay on the books, allowing proponents of tax incentives for homeownership. Analysis of a blueprint-like tax this type of tax reform to emptily boast that the deduction has been preserved. reform plan shows that home-owning families with incomes between Opposing/Supporting Viewpoints 550.000-5200.000 would face average km-hike, of 5815 in the year will argue that a simpler tax code with lower rates is better for after enactment while non-homeowners in the same income range would • Critics enjoy average annual tax ruts of 5516. housing than the current system, and the MID most benefits high-income — Homeowners already pay 83 percent of all federal income taxes, and this homeowners who do not need help buying a home. share would go even higher under similar reform proposals. Homeowners • NAR responds that 88 percent of all those claiming MID earn less than should not have to pay a higher share of taxes because of tax reform. 5200,000, and limiting or repealing current housing tax incentives would We Must Reverse the Decline in First-time Homebuyen hurt the housing sector and unfairly harm homeowners who already pay — The tax code historically has encouraged homeownership. Proposals that 80 — 90 percent of all federal income tax. limit interest and property tax deductibility would reverse this course. • Critics will argue that deductions for state and local taxes subsidize high — The number of first-time homebuyers is coming off an all-time low and taxes and encourage bloated governments. in 2016 the homeownership rate was at a 50-year low. • NAR responds that repealing the property tax deduction would unfairly — Homeownership provides social benefits to communities, increasing cause double taxation of the same income. neighborhood stability and community involvement. America must continue to encourage homeownership. • Some reformers believe that eliminating itemized deductions would greatly simplify the tax system. • We Cannot Afford Mother Housing Crash • Advocates for homeownership counter that the small reduction in — Proposals limiting tax incentives for homeownership would cause home complexity achieved by raising the standard deduction would come at values everywhere to plunge. Estimates show that values could fall in the short run by more than 10 percent if a blueprint-like tax reform plan too high of a price—the loss of tax incentives for owning a home and the resultant harm to the housing market, communities and the economy. were enacted. The drop could be even larger in high-cost areas. It may take years for home values to rebound from such a significant • Critics argue this the like-kind exchange is a loophole that exclusively decrease. benefits those fortunate enough to own investment property. — With this size of a dive in values, homeowners with relatively small • Real property advocates counter that repeal or cutback of the provision amounts of equity would again see their mortgages go under water, would harm economic growth and job creation. NATIONAL ASSOCIATION of www.narrealto . r REALTORS' 500 New Jersey Avenue, NW • Washington, DC 20001-2020 • 800.874.6500 • REALTOR' EFTA00307747 TALKING POINTS wins It 1114 National Flood Insurance Program Congressional Action Needed Private Market Options Must Be Included • Authority for the National Flood Insurance Program (NFIP) expires on Pass the "Flood Insurance Market Parity and Modernization Act" September 30. 2017. (S. 563/H.R_ 1422), which was unanimously adopted (419-0) by the House last year. • Urge Congress to pass a multiyear reauthorization with needed private market reforms to avoid adding uncertainty to real estate markers. NFIP premiums are based on national averages, so half of policyholders pay too much and half pay too little in premiums. Congressional Actions To Date • Enabling consumers to meet federal requirements with a private plan offers • House Financial Services Subcommittee Chair Sean Duffy (R-WI) is now an alternative to overpriced NFIP policies. drafting an NFIP reauthorization bill that includes mapping. mitigation and • There is a considerable and growing private market that is offering better private market reforms; the Senate is waiting on the House bill. coverage at a lower cost than the NF1P. Senators Heller (R-NV) and Tester (D-MT) and Reps. Ross (R-FL) and Castor (D-FL) have reintroduced the "Hood Insurance Market Parity Issue Background and Modernization Act" (S. 563/H.R. 1422) to reduce barriers to private The NFIP was created to provide incentives for communities to rebuild to flood insurance. higher standards and steer development away from flood zones. In exchange, communities gain access to flood maps, mitigation assistance and subsidized What To Tell Your Representatives And Senators insurance to prepay for filmic damage and recover more quickly from flooding. However, the program was never designed to absorb the catastrophic losses Long-term Reauthorization Is Critical of the last decade including Katrina (2005). Sandy (2008) and Baton Rouge • Don't let NFIP lapse. (2016). Ma result, NFIP has borrowed $25 billion from the Treasury and is • Each lapse CO= 40,000 property sales per month. making interest-only payments of $400 million a year. • Without reauthorization, NFIP cannot issue or renew policies in 22,000 The NFIP was last up for reauthorization in 2008. There were 18 short-term communities where flood insurance is required for a mortgage. extensions and a two-month shutdown before Congress reauthorized the program in 2012. Accurate Flood Maps Are Essential • NFIP should use modern mapping technology to produce building-specific Opposing/Supporting Viewpoints risk assessments. • NFIP critics argue that the federal government should not be in the business • Currently, property owners bear the burden of amending the maps to of flood insurance and it is time to privatize the NFIR NFIP supporters remove low-risk buildings from the floodplain. respond that the private market cannot guarantee access to affordable flood insurance for all 5 million NHP policies. • Map amendments require property owners to buy 25,000 land surveys each year at $500 each. • Flood mapping critics say 'scrap the maps" and let the private sector do it. Mapping advocates say that the current maps are developed by the private • The current method of flood mapping and amendment is inefficient. States sector and without them, communities, lenders and property owners could are using the more effective light detection and ranging (LiDAR) to collect not determine where to build, lend or buy. the data for whole neighborhoods at once. • Private market critics believe that private insurers will "cherry pick" the Risk Mitigation Keeps Rates Affordable low-risk properties from NFIR NFIP supporten counter that the private • The best way to keep NFIP rates reasonable is to reduce the risk. market is targeting high-risk, subsidized properties that are net revenue losers for the NFIP. • Elevating a property by two feet can cut flood insurance premiums by as much as two-thirds. • Mitigation critics argue that taxpayer dollars should not be invested in flood-prone properties. Advocates note that U.S. taxpayers are already • U.S. government spends S1.4 billion a year on grants to property owners to spending billions on repairing flooded properties and elevating or relocating repair flood damage. those properties would be more cost effective. • Mitigating, elevating or relocating these properties would save taxpayers $4 for every $1 spent. • Currently, property owners cannot access mitigation grant dollars until after the property floods despite it being more cost effective to elevate or relocate beforehand. NATIONAL ASSOCIATIONof L REALTORS' 500 New Jersey Avenue, NW • Washington, DC20001-2020 • 800.874.6500 • www nen:real:or EFTA00307748 TALKING POINTS MIN IN It it I 0 Protect Sustainable Homeownership Congressional Action Needed Issue Background • Responsibly reform the secondary mortgage market to ensure that the Homeownership has always been a cornerstone ofour nation and differentiates qualified borrowers have access to safe, affordable mortgage financing. the U.S. from many countries around the world. Fiscal constraints have left lawmakers struggling to balance budgets and improve our economy. But there • Ban the use ofmortgage guarantee fees (g- fees) to offset the cost of legislation are critical programs that encourage homeownership —still the American unrelated to homing. dream. Failure to responsibly reform the secondary mortgage market, limit • Ensure that loans used to pay for energy efficiency improvements are subject costs imposed on homeowners, ensure proper loan disclosures, and fund to consumer protection laws. necessary system upgrades for federal housing programs hurts the very fabric and underpinnings ofour society. Congressional Actions To Date • No significant homing finance reform legislation has been introduced in the Opposing/Supporting Viewpoints 115th Congress. • Critics believe that Fannie Mae and Freddie Mac should not be involved • H.R. 916 (Sanford, R-SC: Sherman, D-CA), the "Risk Management in the mortgage market. Rather, they believe free market competition will and Homeownenhip Stability Act," prohibits the use of g-fees as offsets provide better pricing and access to credit for consumers and businesses. for government spending. • Supporters will respond that a purely private mortgage market may provide S. 838 (Cotton, R-AR) and H.R. 1958 (Royce, R-CA: Sherman, D-CA) these benefits, but only for a select few. both entitled the "Protecting Americans from Credit Entanglements Act • Critics argue that all sources of revenue are needed to lower the budget of 2017," extend consumer disclosures to Property Assessed Clean Energy deficit. (PACE) loans. • Supporters respond that diverting g-fee revenue undermines the safety and What To Tell Your Representatives And Senators soundness of the U.S. housing market, and deficit reduction should not be done on the backs of middle-class homebuyers. • Responsibly Reform Our Nation's Secondary Mortgage Market — Reform of our housing finance system is required, as the current • Critics argue that problems with PACE loans are overstated and are conservatorship of Fannie Mae and Freddie Mac is unsustainable. outweighed by enhanced energy efficiency and lower utility bills. - Do not dismantle these entities without identifying a viable replacement • Supporters respond that there are homeowners with PACE loans who are or omit an explicit federal guarantee. These components are critical to in trouble because they were not given the fir0 details of the terms of their safeguard the 30-year, fixed-rate mortgage and ensure families are nor PACE loans. shut out of homeownership. • Ban the Use of Guarantee Fees as a Congressional Piggybank - Freddie Mac and Fannie Mae charge lenders g-fees to guarantee the payment of principal and interest on mortgage-backed securities (MBS). — G-fees are passed on to consumers in the form of higher interest rates. — In recent years, Congress has proposed increasing g-fees to pay for other governmental spending such as tax cuts or transportation spending. — It is wrong to tax a subset of middle-class Americans to cover unrelated federal spending. — Strongly oppose the use of g-fees for any use other than housing. • PACE (Property Assessed Clean Energy) Loans Should Not Hurt the Very Homeowners They Aim to Help — Programs that allow homeowners to improve the energy efficiency of their homes and reduce their energy costs should be encouraged. — PACE loans provide funds for such improvements. However, consumers are unable to make prudent homing decisions due to the lack of proper consumer disclosures. — PACE loans and other energy efficiency lending programs should be subject to the same consumer disclosure laws that apply to mortgages. NATIONAL ASSOCIATION of k REALTORS' 500 New Jersey Avenue, NW • Washington, DC 20001-2020 • 800.874.6500 • www.nar. natter Q(AtIOle EFTA00307749