This is the property of the Daily Journal Corporation and fully protected by copyright. It is made available only to Daily Journal subscribers for personal or collaborative purposes and may not be distributed, reproduced, modified, stored or transferred without written permission. Please click "Reprint" to order presentation-ready copies to distribute to clients or use in commercial marketing materials or for permission to post on a website. and copyright (showing year of publication) at the bottom.


Nov. 9, 2017

Homebuilders fear deduction loss in tax plan

The House Republican tax plan proposes a cap on new loan deductions at $500,000. With average new home prices in much of California higher than $500,000 and most coastal areas in excess of $1 million, this limit threatens to derail our recovering housing market.

1109 sdt pattinson

By Mick Pattinson

Over many years my builder colleagues and I made an annual pilgrimage to Washington D.C. to lobby members of Congress on behalf of The National Association of Home Builders (NAHB). Many issues from lumber prices to house sprinklers to endangered species were on the table. But never the mortgage interest deduction which was sacrosanct in the eyes of builders and legislators alike.

Not anymore!

How ironic that with a homebuilder and developer occupying the White House, builders are now facing the fight of their lives to protect what is most sacred to them. Perhaps the next time a builder runs for president, NAHB will endorse him or her and not stand on the politically correct sidelines waiting to see who wins.

The Republican House proposal, while protecting the mortgage deduction on existing homes is proposing a cap on new loan deductions at $500,000. With average new home prices in much of California higher than $500,000 and most coastal areas in excess of one million dollars this limit threatens to derail our recovering housing market. The National Association of Homebuilders goes so far as to say this legislation threatens to put housing back into recession.

Having worked with the House Ways and Means Committee on an alternative plan to provide a robust homeownership tax credit, NAHB were shocked to learn they were being ignored. The NAHB plan would have helped an additional 37 million homeowners who do not currently itemize - most of them middle and lower income homeowners.

NAHB CEO Jerry Howard has warned members of Congress that stalling the market for high end homes with a limit on mortgage deductibility could have a knock on effect in lower price brackets. A trickledown effect. Certainly with new home production - as opposed to prices - far below peak levels now is not the time to experiment with the cornerstone of long-held housing policy.

With middle class and working class Americans in desperate need of better jobs and higher take home pay, now is not the time to risk another housing bust. Our federal government created the 2008 housing calamity with loose lending requirements, lax oversight of banks and a failed bail out. Now government is at it again.

Imagine a middle class family getting a $4,000 a year break on their taxes but then seeing their home equity fall by $10,000 or $20,000. What good is that?: Undermining the value of their greatest asset in order to put an additional 80 bucks a week in their pocket. That makes no sense, but don't think it can't happen because it did. Fewer than ten years ago.

California stands to be hurt more than most states if this Republican plan goes through. One-third of California homes are currently purchased at prices over $500,000 and we need all the help we can get to overcome the built-in restrictions of excessive fees and regulations charged by government bodies. San Diego's housing supply is still on a downward trajectory with only 8,000 new home units - including rentals -- anticipated this year versus 10,000 last year. When will it end?

With the GOP plan still making its way through the House of Representatives let us hope sanity will prevail and the $500,000 cap will be removed. Failing that it will be up to the US Senate to put their personal vendettas aside and come up with a plan for the hard working middle and lower class people of this country. Sadly these are demographic groups most Senators are unfamiliar with, comfortable as they are in their ivory towers. Housing may be staring at yet another government created set back. Just when and where we least expected it.

Mick Pattinson is past president of the San Diego Building Industry Association and the California Building Industry Assoictaion. The opinions expressed here are his own.

#344771

For reprint rights:

Email jeremy@reprintpros.com for prices.
Direct dial: 949-702-5390

If you would like to purchase a copy of your Daily Journal photo, call (213) 229-5558.

Send a letter to the editor:

Email: letters@dailyjournal.com