Thursday, the House of Representatives passed its Tax Cuts and Jobs Act, sending it to the Senate, but the housing industry is not happy about the decision.
H.R. 1, which passed through the Ways and Means Committee last week, would slash the mortgage interest deduction in half from $1 million to $500,000. However, Speaker of the House Paul Ryan claims the bill would enable homeownership by giving a tax cut to most middle-income families.
Housing experts explained the House bill could cause inventory shortages in many cities and be especially hard on areas such as California where home prices are higher.
And now the industry is expressing its disappointment.
“The Community Home Lenders Association is disappointed that the House approved its tax bill without making changes we believe are needed to preserve homeownership tax incentives,” CHLA Executive Director Scott Olson said.
“We urge Congress to consider CHLA's proposal for a targeted 15% credit for mortgage interest and property taxes – which would also protect the very types of taxpayers receiving a tax increase under the bill,” Olson said.
Texas and Florida housing groups, who previously sent a letter to Speaker of the House Paul Ryan urging the House not to pass the bill in its current form, said it will hinder hurricane disaster areas from swiftly recovering.
“We are deeply disappointed that Speaker Ryan and the House have disregarded our concerns and passed a tax bill that, if signed into law, would hinder efforts to repair, rebuild and replace homes damaged by Hurricanes Harvey and Irma,” a statement from the Texas Affiliation of Affordable Housing Providers and the Florida Housing Coalition said. “Thousands of Texans and Floridians affected by these hurricanes – including those forced to relocate – will now face greater uncertainty.”
“While the House’s decision has put private activity bonds at risk, it is encouraging to see that the Senate’s bill would not eliminate these crucial bonds,” the statement continued. “As this discussion continues, we will continue to advocate strongly for housing needs in Texas and Florida, including the needs of those impacted by Hurricanes Harvey and Irma.”
The National Association of Realtors, one of the most vocal opponents of the tax bill, expressed its disappointment, but pointed out the fight isn’t over yet.
“It’s disappointing to see this legislation move forward, but the real work to shape this debate is just getting started,” NAR President Elizabeth Mendenhall said. “Realtors will now look to the Senate as we make our case that the tax reform proposals pending before Congress overwhelmingly remove the tax incentive to purchase and own a home in America.”
“This is about much more than a cap on the mortgage interest deduction,” Mendenhall said. “Rather, it is about whether homeowners will have the rug pulled out from under them with a tax system that suddenly favors renting over owning in a big way.”
Another expert pointed out the new tax reform bill would diminish the effectiveness of the Low-Income Housing Tax Credit at a time when it is the rental market is becoming less affordable than ever. In fact, Fannie Mae and Freddie Mac even just re-entered the LIHTC market.
“The House bill also severely diminishes the effectiveness of the Low-Income Housing Tax Credit, which is essential to spur the production and rehabilitation of affordable rental housing,” said Granger MacDonald, National Association of Home Builders chairman.
“With the nation already in the midst of an affordability crisis, undermining the LIHTC will deal a crippling blow to keep housing affordable and available for those citizens who are most in need,” MacDonald said. “And the bill will make it far more difficult for small businesses to compete and thrive because it disproportionately benefits corporations.”
However, the administration is pleased with the vote, and President Donald Trump expressed he wants the Senate to pass the bill, sending it to his desk by December.
“Today's vote by the U.S. House of Representatives is a historic step towards delivering tax cuts to the American people,” U.S. Department of the Treasury Secretary Steven Mnuchin said.
“We are committed to work with Congress to provide a simpler and fairer tax system that will lead to better jobs for American workers and higher economic growth,” Mnuchin said. “I congratulate the House on today's vote. I look forward to continuing to work with the Senate to pass a pro-growth bill as well.”
