Phipps: Political Survival Is the Job at Hand

By Robert Freedman, Senior Editor, REALTOR® Magazine

It’s difficult to know where to turn your attention when there are so many areas in which REALTORS®’ livelihoods are challenged. Financially strapped governments are proposing transfer fees and other taxes on real estate to shore up depleted revenues. Some lawmakers and business interests are trying to put control of the mortgage secondary market exclusively in the hands of private banks. And big Wall Street financial interests and other corporations are pouring unprecedented amounts of money into political advocacy efforts to advance their agendas since the U.S. Supreme Court last year opened the floodgates to unlimited corporate spending in elections when it overturned 100 years of legal precedent in its Citizens United decision, which effectively gives corporations the same political speech rights as individual citizens.

malta, helsel, mendenhall

Answering members’ questions. From right, Vince Malta, NAR vice president and liaison to government affairs, James Helsel, Jr., past NAR treasurer, and Elizabeth Mendenhall, NAR vice president and liaison to committees

Pointing to this backdrop, NAR President Ron Phipps told thousands of REALTORS® Wednesday at a virtual town hall meeting that “we are at a threshold. Housing is under attack in a way we’ve never seen before.”

Phipps hosted the virtual town hall in Chicago and broadcast live to thousands of REALTORS® around the country to explain and take questions on one of the association’s biggest and most controversial proposed initiatives ever: the REALTOR® Party Political Survival Initiative, which would inject almost $200 million into local, state, and national political advocacy efforts over the next five years to give REALTORS® resources to fight the assault on home ownership. Through a live feed, REALTOR® associations in Washington State and the District of Columbia participated and were invited to ask questions of Phipps and members of his leadership team, as well as former NAR President Cathy Whatley, who chaired a presidential advisory group, or PAG, that developed the proposal.

“The situation, frankly, is serious, not merely because our livelihood is at stake, but because home ownership in an absolute sense is at stake,” said Phipps. “Since World War II, our country has made home ownership a priority, but that’s changing. The privileges our grandparents, parents, and we have are being eroded, and we don’t want them denied to our children. Our initiative is about an agenda way beyond us. It’s about our purpose as a country.”

The PAG that developed the REALTOR® Party Political Survival Initiative was appointed by 2010 NAR President Vicki Cox Golder immediately following the Citizens United ruling. After a year of work, the PAG earlier this year presented President Phipps with its proposal and, in a special meeting held earlier this week, the NAR Executive Committee recommended moving forward with the plan. The initiative now goes before the NAR Board of Directors for a vote at its meeting in Washington on May 14.

Moe Veissi, NAR president-elect, takes calls from members on political survival initiative.

Moe Veissi, NAR president-elect, takes calls from members on political survival initiative.

The initiative calls for generating an estimated $195 million over five years through an annual dues increase of $40, which would be dedicated to political advocacy efforts. Two-thirds of that revenue and the services it pays for would be made available to local and state associations.

The dues proposal is REALTORS®’ answer to the hundreds of millions of dollars that corporations flooded into last year’s elections in the form of issue and other political advocacy campaigns and that are already pouring into next year’s national elections. The money is considered “soft dollars,” that is, corporate or dues funds that are not subject to strict limits imposed on so-called hard dollars that individuals and institutions contribute directly to political candidates.

Under the plan, NAR members would continue to contribute to the REALTORS® Political Action Committee (RPAC), which collects the hard-dollar donations that can be directly contributed to candidates selected by RPAC trustees. RPAC also collects and disburses soft funds, which are deployed in what are known as independent expenditures: advocacy activities that advance real estate interests and promote legislators deemed “REALTOR® champions” but aren’t done in coordination with any candidate.

At the town hall, NAR leaders explained the array of attacks on the way real estate is financed, taxed, and regulated that add up to an assault on the institution of home ownership itself. “We find ourselves in a perfect storm,” said Whatley.

Among the hits to home ownership that were described:

Mortgage Interest Deduction. Lawmakers are embarking on comprehensive tax reform as part of major efforts to rewrite the federal budget, and MID is expected to be part of the discussion. Even if the 100-year-old tax benefit is preserved for home owners, NAR leaders said, it could face curtailment in other ways, including restrictions on its use for second homes.

Fannie Mae and Freddie Mac. Some lawmakers want to go beyond reforming secondary mortgage market companies Fannie Mae and Freddie Mac to eliminating them outright and, in some proposals, replacing them with no form of federal involvement, leaving mainly FHA to pick up the pieces for borrowers who can’t find financing in the conventional market. Their elimination with no new form of federal backstop would threaten the availability of the basic 30-year, fixed-rate mortgage that middle class households rely on and that have proved to be safe and affordable, even during the deepest part of the downturn.

Qualified residential mortgage exemption. As part of the sweeping Wall Street reform law enacted last year, banks are required to hold in their portfolio at least 5 percent of the value of the mortgages they originate that are securitized for sale to investors. That skin-in-the-game provision will lead to mortgage rates rising by an estimated 300 basis points, putting home ownership out of reach for many. However, the law includes an exemption to this 5-percent risk-retention requirement for mortgages that are considered safe. Lawmakers made clear while writing the law that “safe” refers to mortgages that are soundly underwritten to creditworthy borrowers the way typical fixed-rate and adjustable-rate mortgages handled by Fannie Mae and Freddie Mac are. But regulators in writing the rules to the law are proposing to define “safe” as mortgages with a minimum 20 percent down payment, which could raise costs to borrowers for almost 70 percent of the market, according to some estimates. Even a 10 percent minimum down payment would devastate sales.

Tax on services. At the local level, governments around the country are ramping up efforts to pass sweeping taxes on services, including real estate sales, to fill their empty coffers with revenue. “Everything’s going to be put on the backs of point-of-sale,” says Beth Peerce, president of the California Association of REALTORS®. Even at the national level, there’s talk of a national tax on real estate sales and other services as part of the mix to shore up the federal budget, Peerce says. Among those proposals is a 4.5 percent tax on services, which would effectively eliminate today’s thin profit margin for brokerages, she says. Peerce wasn’t part of the town hall but spoke with REALTOR® Magazine by phone yesterday.

“The list of attacks on real estate goes on and on,” said Whatley

At the town hall, the NAR leaders acknowledged the uncertainty and concern the initiative raises, and sought to answer those as thoroughly as they could:

Loss of membership. Local and state association executives and their leaders are concerned the dues increase will drive out membership.

Response: Phipps and others said the REALTOR® brand, its services, its organizational strength, its Code of Ethics, and its programs provide value to real estate professionals far beyond the amount of dues members pay, even with an increase. “We have to do more to help members see the value of the association,” said Phipps. “If the conversation just focuses on the cost of this initiative, members won’t have the full picture. We need to close our members on our value, and this initiative is very much a part of that value.”

Help with ground-level agency issues. Practitioners say disclosure and other agency issues continue to be among the most important and they want to be sure the initiative can help them with confusing state disclosure rules.

Response: The leaders said agency issues are exactly the kind of thing for which local associations can get more resources—both in dollars and expert help—than before. “NAR wants to partner with associations looking to make changes to these rules,” said Vince Malta, NAR first vice president and liaison to government affairs.

These kinds of issues are even percolating at the national level, with talk among some lawmakers of instituting national licensing requirements for real estate professionals and the new Consumer Financial Protection Bureau, created last year as part of Wall Street reform, that is set to start writing rules that could impact how real estate is handled at the local level because of its jurisdiction over how financial services are provided.

Erosion in RPAC support. RPAC fundraisers say their existing tools will be insufficient to motivate their members to donate to RPAC if dues money is dedicated to political advocacy.

Response: Leaders said the key is educating members about how deployment of the new funds would differ from that of RPAC contributions. “One pool of funds is for independent expenditures or ‘non-hard dollar’ advocacy efforts, which is what we mean when we talk about corporate funds,” said Moe Veissi, NAR president-elect. “One is for RPAC ‘hard dollar’ contributions that go directly to REALTOR® champions on the Hill. The funds that come out of the proposed $40 dedicated dues increase go to the independent expenditures. Those are corporate, or soft-dollar, contributions. If there’s someone at the local level that needs support beyond making contributions to the candidate, REALTORS® can use the corporate funds to pay for TV ads and other types of support that aren’t part of the candidate’s campaign.”

RPAC fair-share performance. Local leaders are concerned that, if volunteer donations to RPAC decline, local and state associations will face restricted access to advocacy help under the initiative if they don’t meet their fair-share contribution goal under RPAC.

Response: Although the idea of tying funds to RPAC performance was floated as a way to reinforce the importance of continued strong RPAC donations, that idea was rejected by AEs and members who heard the proposal. Now there’s no tie between RPAC fundraising performance and the availability of funds under the initiative. “We’re still committed to the goal of strong RPAC contributions, because that need continues to grow,” said Malta.

Alternatives to the initiative. One caller asked what other choices are available for addressing the new political climate if the initiative isn’t approved by the Board of Directors.

Response: Whatley said she’s confident the initiative will pass, and others on the leadership team said the alternatives are not as effective as the initiative. NAR Immediate Past President Vicki Cox Golder said associations would have to continue to rely on the relatively small percentage of their membership that donate and are politically involved, and that that’s not a recipe for thriving in an environment in which corporations are pumping hundreds of millions of dollars into advocacy efforts. “It’s just a few of us pulling the contributions along,” she said. “We can’t rely on those few people to a further degree if this initiative doesn’t pass.”

NAR Treasurer Bill Armstrong pointed to NAR’s eight-year battle to keep banks out of real estate and what the environment would look like today had the banks succeeded in their effort. Other efforts like the banks’ will be made and it will be harder to stop them if it remains business as usual among REALTORS®, he said.

Fate of Public Awareness Campaign. Some members have suggested that funds from NAR’s national TV and radio ad campaign be diverted for this purpose. Others have said they don’t want to see an end to the campaign, which publicizes to consumers the difference between REALTORS® and other real estate practitioners and the advantages of working with a REALTOR®.

Response: Phipps said using the Public Awareness Campaign funds is an option that was considered by the NAR Executive Committee, but the Committee voted earlier in the week to recommend against that option. “We have to fully fund both efforts, the Public Awareness Campaign and the Political Survival Initiative, if we’re going to make this the seventh time housing leads the recovery of the economy,” he said.

Identity of home ownership opponents. A caller said he favored the proposal but faced an uphill battle justifying it to his peers. He said he could better explain the initiative and why it’s needed if there was more information on where these attacks on home ownership are coming from and who is behind them.

Response: Veissi said the attacks are at all three levels—local, state, and national—and they’re not always direct. At the national level, there is the attack on MID, the secondary mortgage market, and the effort by regulators to mandate a minimum 20 percent down payment on mortgage loans that meet the risk-retention exemption for banks. At the local level there is the increase in efforts to impose taxes on services, among other things. But as for naming specific lawmakers or organizations that are driving this anti-home ownership agenda, “we walk a tightrope on that,” Phipps said. “We don’t want to give attackers encouragement.”

Access to funds. Local leaders say they need more specifics on how their associations will access the new resources.

Response: Whatley said it’s just a matter of requesting help from the issue mobilization pool: “If you have a local issue, you come to NAR and request issue mobilization money from the pool of funds for local races or tap campaign services,” she said, which include access to a massive voter database that can help associations target and craft their messages.

Cost-cutting efforts. One caller said any dues increase should come only after NAR ensures its members that the association is operating in as budget conscious a way as possible.

Response: NAR CEO Dale Stinton responded to caller, saying the association has cut about $20 million from its fiscal year budget of about $128 million by cutting more than two dozen positions, freezing pay across the board, and curbing benefits, in part by requiring larger contributions from employees for health benefits. On the cost of its two office buildings, it spends only $3 a square foot on operating costs, despite rental rates in comparable buildings at $30 a square foot in Chicago and $50 a square foot in D.C. About half of the Chicago building and about 60 percent of the D.C. building are leased to tenants.

Corporations will continue to outspend REALTORS®. Despite the dues increase and the substantial increase in advocacy resources, one caller said, corporations will continue to flood races with money at a pace far ahead of what REALTORS® can match.

Response: Phipps said the new resources will enable NAR to be far more strategic in how REALTORS® spend their funds, so while they won’t match corporations in absolute dollars, they can more than match them in strategic terms. “We’re already changing the playing field,” said Phipps.

“To a person, we on the leadership team believe this is critical to our future,” added Phipps. “This is about thriving and not just surviving. We’re passionate about this, but it’s more than passion: It’s just common sense. Harry S. Truman said America wasn’t built on fear. It was built on courage, imagination, and unbeatable determination to do the job at hand. For us, this is the job at hand.”

Read more on RPPSI.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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Comments
  1. Shari Posey

    This is the second time I have submitted this request: Where can I get a detailed account of which candidates and political parties got money from NAR and how much each received?

  2. Robert Freedman

    Shari, I sent you an e-mail with this information.

    Best,

    Rob Freedman

  3. Clay Miller

    I stopped donating to our RPAC two years ago when I learned that in both cases my local Association used those funds to endorse two candidates who had voting records which were anti-business/free market and they actually chose NOT to endorse a fellow Realtor who was running for Senator. It made absolutely no sense at all, in fact it was “suicidal” to our own organization. Before they solicited the donations they spent money hiring a firm to survey & poll us Realtors with the result being that the two pro-real estate candidates were endorsed by us members, but then the association turned around and endorsed the opposition instead. It couldn’t have been more corrupt. That was the last day I gave to RPAC. Hearing those ads on the radio using MY Association’s name and MY dollars to endorse anti-Realtor candidates was a nightmare come true.

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