GOP tax proposal would wallop new Bay Area homeowners and gut affordable housing
PUBLISHED: November 2, 2017 at 1:00 pm
Think the Bay Area housing market is tight?
It could get worse, experts say, if a proposed Republican tax plan — slashing the popular mortgage interest deduction and limiting state and local tax write-offs — makes it into law.
The overheated, high-priced housing market already suffers from a lack of available homes, growing demand and limited options for renters. The median home price in the nine-county region in September was $768,000, a jump of 15 percent from last year.
The Republican plan released Thursday would cut the mortgage interest deduction on new loans from $1 million to $500,000. It would also cap state and local property tax deductions at $10,000, lower than what many Bay Area residents pay annually.
“It’ll have the worst impact on the Bay Area of any place in the country, because housing prices are so high,” said Nela Richardson, chief economist for real estate brokerage Redfin.
Overall, she said, the tax plan pinches upper-middle class families. “There’s no good news for the Bay Area,” she said.
Republicans say the overall tax proposal would benefit Americans by slashing taxes for individuals and businesses. The GOP hopes to have the plan to the president by Christmas.
Jeff Bell, Realtor and chair of the Silicon Valley Association of Realtors legislative action committee, said the tax plan could make a challenging market even harder for first-time home buyers. The association estimated that the cut in mortgage deductions would cost a Santa Clara County homeowner with an $800,000 mortgage on a $1 million home about $4,800 a year.
Existing mortgages are not affected.
But Bell said the tax proposal would encourage homeowners to stay put, limiting the number of homes for sale in an already-tight market. That, in turn, could lead to more bidding wars for single-family homes, he said.
PUBLISHED: November 3, 2017 at 5:41 pm
SACRAMENTO — Less than two months after California passed hard-fought bills to build more subsidized rental housing for the poor, affordable-housing advocates are reeling from a federal tax-reform proposal that could grind that momentum to a halt and wipe out an existing program that created roughly 20,000 such homes last year.
The GOP tax proposal, if passed in its current form, would take away tax exemptions that generate $2.2 billion annually for affordable housing construction in California. For context: The recession-era elimination of state redevelopment funding in 2011 — a move widely criticized as devastating to affordable housing — amounted to losses of roughly $1 billion per year.
“This is definitely a red alert for California,” said Matt Schwartz, president and CEO of California Housing Partnership, a San Francisco-based nonprofit housing organization. “The time is now for anybody who cares about our continued ability to produce affordable rental homes to engage.”
California had expected to build roughly 90,000 affordable housing units as a result of a $4 billion statewide housing bond — pending voter approval in November 2018 — and money from a bill by Sen. Toni Atkins, D-San Diego, which levies a fee on certain real-estate transactions.
That number would be cut in half under the tax proposal, officials say.