School’s coming to members of Congress over the next two days as thousands of REALTORS® meet with lawmakers to provide a refresher course on how critical the federal government’s historic support for home ownership is to the country’s future.
“We have an unprecedented situation today, because so many members of Congress are new and really don’t always know how important home ownership incentives are to the economy and to the country, NAR Chief Lobbyist Jerry Giovaniello told thousands of REALTORS® packed into a 7 a.m. session today as a kick-off to their visits to Capitol Hill.
Each year thousands of REALTORS® come to Washington for the NAR Midyear Legislative Meetings & Trade Expo, which includes two days of Hill visits to champion real estate issues to their members of Congress.
This year is different, Giovaniello said, because as Congress discusses ways to reduce the federal deficit and whether to change the Tax Code, some of the government’s longstanding incentives for home ownership, including the mortgage interest deduction and other tax provisions, will come under debate. The roles of FHA and the secondary mortgage market are also shaping up to be part of the discussion.
“Our main job is really just to educate members on why these incentives have been such priorities for the federal government for so long,” said Giovaniello.
Some 43 percent of the Senate had turned over in the last six years, and in the House, more than 80 members have been in Congress for fewer than three years, many of whom have never served in public office before. “There are many members of Congress who think FHA is a lending program rather than an insurance program, so a lot of what we have to do is just educate these members about these basic things, said Giovaniello.
REALTORS® have three simple talking points they’ll be taking with them to Capitol Hill this week:
1. Preserve MID and other housing tax incentives, including the capital gains exclusion on the sale of a principal residence and the property tax deduction.
2. Protect FHA’s ability to meet its mission of helping responsible households who needs its mortgage insurance to buy a home.
3. And pave the way for the return of private capital to the secondary mortgage market while preserving an explicit, not-for-profit, government-chartered federal presence in the market.
NAR’s tax counsel, Evan Liddiard, said the conditions are the best in almost two decades for Congress to tackle sweeping tax reform, so MID and other tax incentives will be part of the discussion. Liddiard said that even if the two houses of Congress can’t craft legislation that can pass both houses, if any paring back of home ownership incentives are included in bills that at least make it through one house or another, that sets a precedent that will make it easier in later years for harmful changes to pass. “We have to head this off now,” he said.
One argument members of Congress might make in favor of paring back MID is that they need that tax cut in exchange for lowering tax rates, which would help households across the board. But because there’s no guarantee that Congress won’t turn around in a few years and raise the tax rates again, that’s not an argument that makes sense, said Giovaniello. “Once we give up something on MID, we won’t get it back,” he said.
On FHA, which has seen its reserves take a hit in recent years, REALTORS® will be carrying the message that the agency has been the unsung hero of the country’s economic recovery. It stepped up to the plate during the housing downturn and made lending possible at a time when there were few other options. Had it not done that, the country would be in a tougher place right now. And in any case, the agency’s finances are quickly improving and could soon be in positive territory once again.
“FHA is a counter-cyclical program,” said NAR Policy Analyst Megan Booth. “It’s role is to step up when other sources of funding won’t, so it did its job.”
Legislation could be coming down the pike that might seek to require borrowers to come with a higher downpayment or to pay higher insurance premiums or to meet certain income qualifications, said Booth. each of these provisions would be devastating to the agency’s mission and needs to be resisted, she said.
The main message on reform of the secondary mortgage market is that a continued federal presence, explicit and on a nonprofit basis, is essential for the preservation of the widespread availability of 30-year, fixed-rate mortgages. Private lenders without that federal backstop simply won’t make safe, long-term financing available on a widespread basis.
“We’re going to hold members accountable for how they vote on these issues,” Giovaniello said. “That’s one of the messages we need to take to Capitol Hill. We’re watching what they do.”
To reinforce the message, REALTORS® will be wearing badges on lanyards that carry a simple message: “Home ownership is not a loophole.”
Over the next two days, that message will be out in force on Capitol Hill.