A Message from President Mike Theo: Now What?

 Mike Theo  |    December 08, 2016

Well, I didn’t see that one coming. Neither did most people. But with the contentious presidential, congressional and legislative elections of 2016 now in the history books, it’s time for us to ask, now what?

The voters are never wrong. You may disagree with their decisions ‚ÄĒ and there are certainly a great many in this country and this association who wanted a different outcome ‚ÄĒ but the voters have the last word, and on November 8, they spoke. As President-elect Trump now assembles a new executive branch of the federal government, he transitions from politics to policy. We must too.

Whether you are happy or sad right now, we must all realize that vitally important policies impacting our industry and property owners will soon be debated and decided in the halls of Congress and the town halls across America. This is a time to engage in the law-making process, regardless of whether your candidates won or lost.

I have used this space in the past to discuss federal and state tax reform and the impact certain proposals could have on our business and our economy. What those proposals might be is still up in the air, but it’s now very clear that tax reform will be debated in Congress in 2017.

While there is broad bipartisan support for tax reform, the parties differ significantly on what the goals should be. Generally speaking, most Democrats believe tax reform should produce more revenue from wealthier taxpayers, while most Republicans want additional revenues from broadening the tax base and using those monies to lower tax rates. The desire for tax reform produced many plans in 2013, 2014 and 2015, but these fundamental partisan disagreements on outcomes have produced nothing but stalemate. 

That was then. With the White House and both houses of Congress now in Republican control, the opportunities ‚ÄĒ and threats ‚ÄĒ of major tax reform are now imminent. And the reform agenda is likely to go beyond taxes and into finance and regulatory reforms as well.¬†

What does that mean for real estate? It’s too early to know exactly what will be proposed, but the tax reform issues will likely include limitations to the mortgage interest deduction; limits or outright repeal of the property tax deduction; restrictions to like-kind (section 1031) exchanges; and changes in the capital gains exclusion. Finance reform will likely include changes to Fannie and Freddie, perhaps to semi-privatize them and also limit taxpayer exposure; changes to the Dodd-Frank financial regulations, perhaps to treat smaller banks and nonbanks differently from the mega-banks and to ease deposit requirements; reigning in of the Consumer Financial Protection Bureau (CFPB) and provide some stricter level of congressional oversight; to name a few. President-elect Trump has also mentioned some displeasure over the Federal Reserve Board, changes to which could impact interest rates depending on what macroeconomic policies his administration wants to pursue. Finally, reforms could also include regulatory reforms. In a speech to the National Association of Home Builders, candidate Trump acknowledged that 25 percent of costs for new residential construction was due to governmental regulations. He supported reducing those regulations and costs, helping both the construction industry and housing affordability. 

Future articles here will give us time to dive deeper into these policies and discuss the possible impacts to our industry, the national economy and American families. But for now, the important answer to the question ‚Äúnow what?‚ÄĚ is for each and every member to get and stay engaged in the public policy debates to come. That means stay informed, communicate with your elected officials ‚ÄĒ particularly your members of Congress ‚ÄĒ respond to WRA and NAR Calls to Action, and motivate your colleagues to do the same. Whether you‚Äôre happy or sad about the election outcome, the issues that are certain to be debated in 2017-18 will be every bit as historic as these elections. My post-election admonition: do not disengage at precisely the moment we, as an industry and association, need to intensely engage.

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