Affordability, accessibility and wealth accumulation are a few of the hurdles the aging population will have to overcome…
What The New Congress Means For Real Estate
Don’t expect any sea changes coming from the midterm election when it comes to real estate. For one the housing market, unlike the stock market, does not make sudden moves based on events like elections.
Buyers will still purchase homes and sellers will still list their houses.
That is the same with the economy, it will remain strong regardless of shifts in the U.S. Congress.
However, longer term public policy can play an important role, as we have learned with actions by the Federal Reserve, starting three years ago when it began raising interest rates.
Plus, tax reform has played a role — good and bad — with the real estate scene.
Tax reform rollback?
Last November around this time, much of Washington was focused on the first major piece of legislation from the Republican Congress: the Tax Cuts and Jobs Act, which passed a month later along party lines.
The tax reform bill included some major changes for real estate, including capping mortgage interest deductions at $750,000 for both primary and secondary residences (down from $1 million previously), and capping state and local tax deductions at $10,000 (no previous cap). It also allowed pass-through entities and S-corporations — which some real estate agents and brokers may qualify as — to claim a 20 percent deduction on their business income.
There is unlikely to be a major roll back of this policy anytime soon.
Even with a new split House and Senate, the Congress is unlikely to pass a full rollback and President Trump would not sign a retreat of his major policy initiative. However, certain adjustments could be made through amendments, such as raising the property tax deduction.
Budget cuts will be stalled…
Facing a ballooning $779 billion national budget deficit, the highest in six years, President Trump recently said he would ask all the members of his cabinet to cut 5 percent from their respective departmentmental budget proposals for 2019 (Agriculture, Education, Housing and Urban Development, Health and Human Services, etc).
However, Congress approves the federal budget and funding for all major government departments. It’s unlikely that Democrats and Republicans will agree to much on the way of cuts. Democrats will most likely fight to preserve funding for social services, education, and benefits programs, including for women’s health and affordable housing, while some Republicans will look to make deeper cuts.
Without agreement on what to cut, neither party will sign on to pass bills aimed at reducing the budget deficit, leaving attempts to curb the deficit to another Congress with a clearer majority.
Flood insurance will not be reformed…
Just weeks after the midterms elections come to a close so too will the National Flood Insurance program, an ailing 49-year-old insurance plan that will lapse in December without re-authorization or partisan support of the so-called “21st Century Flood Reform Act.”
Such an endeavor is easier said than done, as the bill has languished in the Senate since late last year — ever since the GOP-led House voted in favor of the bill 237-189 despite significant opposition from coastal Democrats, who believe premiums on high-risk properties could skyrocket under the reform initiative.
Under the terms of the “21st Century Flood Reform Act,” premiums, which on average cost homeowners $650 annually but can spin out of control in coastal regions, would be capped at $10,000. Additionally, new mapping technology authorized in the new legislation would reduce rates by calculating the true risk of flooding farther inland.
Either way, expect the lights to dim on flood reform.
The mortgage finance system is unlikely to be overhauled entirely.
Under a Trump administration plan to end the conservatorship of Fannie Mae and Freddie Mac, first floated over the summer by the Office of Management and Budget, both government-sponsored entities would be tossed into the private market, requiring each to raise their own capital and compete with traditional lenders.
But for such an endeavor to pass muster in Congress, Democrats would likely demand key concessions to buoy affordable housing. Under Trump’s proposal, HUD, which would take responsibility of all affordable housing objectives, would be untethered from the traditional mortgage market.
Critics of the proposal fear that such a shift would allow lenders to be more selective. Therefore, the odds of significant changes appears low at best.
Executive orders by the President are expected to continue, such as moves to further wipe out punitive financial regulations and easing environment enforcement.
No new middle-class tax cut…
In the runup to the 2018 midterm elections, President Trump said in late October that he was working with Congressional Republican leaders to pass a new tax cut bill that would reduce the burden on middle class families by 10 percent.
However, just last week, the president and House Ways and Means Committee Chairman Kevin Brady, a Republican Congressman from Texas, said that they would need to continue working on further tax cuts with the intention of passing them during the next session of Congress, in 2019.
Once again, since the entire Congress must vote on any new major tax cut or reform package affecting the nation, and a majority must vote in favor, it is unlikely that the new Congress will pass any significant changes.