Budget in Brief: Top 10 State Budget Provisions Impacting the Real Estate Industry


 Tom Larson  |    August 06, 2015
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On July 12, 2015, Gov. Walker signed the 2015-17 state budget into law. While the budget has generated a lot of media attention and public interest because of delays in the approval process and provisions related to funding for the University of Wisconsin, K-12 schools and transportation infrastructure, just to name a few, the budget also contained a number of less-publicized initiatives that have a direct impact on the real estate industry, including regulatory reforms, property tax reductions, and funding for economic development and real estate programs. 

The following is a list of 10 state budget provisions that will likely have a significant impact on the real estate industry. 

Time of sale requirements: This provision in the state budget prohibits local units of government from requiring inspections, property maintenance or payment of related fees at the time of sale (TOS) or title transfer. By preventing transfers of title until various property maintenance items are performed ‚ÄĒ such as paving gravel driveways, clearing weeds or repairing fence boards ‚ÄĒ TOS requirements have become a headache for both homeowners and REALTORS¬ģ and can add delays and significant costs to a transaction.

Shoreland zoning changes: This provision in the state budget makes a number of changes and clarifications to the state shoreland zoning regulations including:

  • Preventing counties from adopting shoreland zoning regulations that are more restrictive than the state shoreland zoning regulations (NR 115). Note: this budget provision does not prohibit counties from enacting regulations that are not covered by NR 115.
  • Prohibiting county shoreland zoning regulations from applying vegetative buffer zone standards to existing homes.
  • Requiring county shoreland zoning ordinances to allow view access corridors to run contiguously (rather than separated by a certain distance).
  • Prohibiting state and county shoreland zoning regulations from:¬†
    • Prohibiting or regulating outdoor lighting.
    • Prohibiting, regulating or imposing a fee for maintenance, repair or replacement of nonconforming structures that do not increase the size of the footprint unless expansion is necessary to comply with state or federal requirements.¬†
    • Prohibiting, regulating or imposing a fee for vertical expansion of a nonconforming structure unless the vertical expansion is 35 feet above grade level.¬†
    • Establishing impervious surface standards unless those standards take into consideration systems or discharges that allow for infiltration.
  • Applying protections for nonconforming principal structures to nonconforming accessory structures, such as garages, boathouses or sheds.
  • Prohibiting counties from adopting more restrictive regulations than those in the state shoreland zoning regulations relating to the construction of structures on substandard lots.

Property taxes: This provision further reduces property tax bills in Wisconsin in two ways: 

  1. Continuing to honor the state‚Äôs commitment to allocate approximately $200 million each year in state general purpose revenues to help fund Wisconsin‚Äôs technical colleges thereby reducing property taxes by the same amount ‚ÄĒ which is a $131 reduction for the average homeowner over the biennium.¬†
  2. Modifying the school levy tax credit, resulting in an additional property tax reduction for property owners over the biennium ‚ÄĒ which is a $3 reduction for the average homeowner over the biennium.¬†

 

Local levy limits: This provision limits property tax increases by maintaining the current property tax controls for school districts, counties, municipalities and technical colleges, which:

  • Places a 0 percent property tax cap on local levies.¬†
  • Allows increases based on net new construction.¬†
  • Authorizes local governments the power to carry forward up to 5 percent of unused levy authority for up to five years.¬†
  • Enables local governments to exceed the levy limits if approved through local referendum.¬†

 

Historic rehabilitation tax credits: This provision maintains the 20 percent state tax credit with no overall caps for historic rehabilitation projects. These projects have generated approximately 2,800 jobs and $353 million in economic development activity since the tax credit was increased from 5 percent to 20 percent in 2013. As originally proposed, the state budget placed a $10 million overall cap on the amount of historic rehabilitation credits that could be awarded over the biennium, along with several other onerous provisions that could have had significant impacts on the continued viability of historic rehabilitation projects in Wisconsin.

Lead paint: This provision federalizes Wisconsin‚Äôs definition of ‚Äúlead-bearing paint,‚ÄĚ which has a lower lead-content threshold than the definition provided for under federal law. The existence of lead-bearing paint triggers various remediation requirements for residential renovations and remodeling but could very soon impact the same activities for commercial and government buildings under proposed EPA rules.¬†

Regulation of septic systems: Another state budget provision keeps regulatory oversight of private onsite wastewater treatment systems (POWTS) with the Wisconsin Department of Professional Services. The budget originally proposed to transfer this oversight to the Wisconsin Department of Natural Resources. The DNR, though, historically has not looked favorably upon rural development or new technologies allowing septic systems to be used in more areas. 

Real estate license renewal and CE requirements: This state budget provision maintains consistency between real estate continuing education (CE) and license renewal time frames to ensure greater compliance with CE requirements and competency among real estate licensees with respect to new changes to forms and regulations. The state budget initially included a proposal that would have eliminated the consistency between CE and license renewal requirements by requiring license renewal every four years and CE requirements every two years without adequate enforcement measures to ensure that CE requirements would be met. Without adequate enforcement measures, some real estate licensees may be less likely to stay up to date on changes to forms and regulations, which could lead to reduced competency levels by licensees, more consumer complaints and possibly additional regulations on all real estate licensees in the future. 

Maintain the $10 fee to fund the UW Real Estate School: This provision maintains the $10 allocation from the real estate license renewal fee to fund the top-ranked University of Wisconsin Graaskamp Center for Real Estate to continue research, education and public outreach on housing and real estate issues. The WRA helped pass the law to allocate $10 in 1992 and has actively supported it since due to the UW Real Estate School’s important role in educating the public and policymakers about the significant function that the real estate industry plays in the national, state and local economies. 

WHEDA/WEDC merger: This provision maintains the independence of both the Wisconsin Housing and Economic Development Authority and the Wisconsin Economic Development Corporation by eliminating the proposed merger of the two agencies. Critics maintained that a merger of the two would negatively impact the reputation and solvency of WHEDA, which oversees various affordable housing, economic development, and agricultural loan programs.

The WRA lobbying team worked closely with lawmakers and the governor‚Äôs office on these and other items in the state budget ‚ÄĒ such as the stewardship program, state funding for the Milwaukee Bucks arena and transportation funding ‚ÄĒ to help improve the regulatory environment, reduce costs of property ownership, and maintain programs that promote economic development and preserve the quality of life that we enjoy in Wisconsin. In addition, several of these issues were on the agenda for REALTOR¬ģ & Government Day in March 2015, which brought approximately 300 REALTORS¬ģ to the Capitol to meet with state lawmakers to discuss the importance of these issues to the real estate industry.¬†

For more information on the state budget, contact Tom Larson at tlarson@wra.org or at 608-240-8254.

Tom Larson is Senior Vice President of Legal and Public Affairs for the WRA.

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