Considering Move

Tax bill causes onethird of homeowners to consider a move

About one in three homeowners would at least contemplate a move under the provisions of a tax reform bill recently passed in Congress, according to the real estate company Redfin.

Redfin issued the survey to nearly 900 homebuyers on its site between Nov. 18 and 21, after the House passed its version of the bill but before the Senate version passed on Dec. 2. The survey asked respondents, who were under contract or planning to buy a home in the coming year, whether they would consider moving to a different city or state if the legislation removed the ability to deduct state and local taxes.

Sixteen percent said they would consider moving, while 11.4 percent said they would "seriously consider" moving. Another 5.5 percent said they would "absolutely" move.

Most respondents—42.1 percent—said they wouldn't move as a result of the legislation. A total of 17.6 percent said they didn't know if the bill would cause them to move, and 7.4 percent selected the option reading, "This change wouldn't affect me."

"The uncertainty of the tax reform bill is looming on our customers' minds, and it has caused well-qualified clients who have found a home they like to hold off until the matter is resolved," said Kalena Masching, a Redfin agent serving the Silicon Valley market in California. "In a market like ours where potential loan amounts regularly hit six figures and residents pay high state taxes, the proposed tax reform has serious ramifications for homeowners."

The House and Senate are currently working to reconcile differences in their bills before sending the legislation to President Donald Trump. The House bill proposes limiting mortgage interest deductions to home loans of $500,000 for newly purchased homes, while maintaining the $1 million limit for current homeowners; the Senate bill does not make changes to mortgage deductions. The House bill limits state and local property tax deductions to $10,000, while the Senate bill eliminates them entirely.

Supporters of the tax bill say it will help lower taxes for lower- and middle-class households, while encouraging job growth and wage increases by reducing corporate tax rates. Opponents say it will add to the deficit, benefit the upper class at the expense of lower classes, and have little or no beneficial impact on the economy.

The real estate industry has expressed opposition to the bill due to changes in the deductions homeowners are able to claim. After the Senate version of the bill passed, the National Association of Realtors issued a statement saying the legislation "dramatically undercuts the incentive to own a home."

The National Association of Realtors argues that the bill will cause home values to decrease in every state, with a larger impact in states with high home values or taxes. In Connecticut, the organization determined that the $500,000 mortgage interest deduction cap would affect 17.4 percent of homeowners with a mortgage, while the $10,000 limit on real estate taxes would affect 13.3 percent of homeowners. The National Association of Realtors estimates that Connecticut home values would

$44,700 for the typical homeowner—if both the mortgage interest deduction and state and local tax deductions were eliminated.

In Rhode Island, the organization calculates that 10.3 percent of homeowners with a mortgage would be affected by the $500,000 mortgage interest deduction cap while 4.8 percent would be affected by the $10,000 cap on state and local tax deductions. It estimates a loss of 11 to 17 percent in property values—$27,120 to $40,700—for the typical Rhode Island homeowner if the mortgage interest deduction and state and local tax deduction were eliminated.

“Realtors support tax cuts when done in a fiscally responsible way; while there are some winners in this legislation, millions of middle-class homeowners would see very limited benefits, and many will even see a tax increase,” said Elizabeth Mendenhall, president of the National Association of Realtors. “In exchange for that, they’ll also see much or all of their home equity evaporate as $1.5 trillion is added to the national debt and piled onto the backs of their children and grandchildren.”

The National Association of Home Builders declared on Nov. 17 that the Senate version of the tax bill “fails to provide a meaningful incentive for homeownership for the middle class.” However, it also said it would preserve some provisions meant to improve the production of affordable housing, such as the Low-Income Housing Tax Credit and the tax-exempt bond program. The NAHB also complimented the Senate bill for “sufficient tax reductions” for small businesses.

Some conservative commentators have criticized state and local tax deductions as unfair and expressed support for their elimination. Jonathan Williams and Sal Nuzzo, writing for the think tanks American Legislative Exchange Council and The James Madison Institute, describe the deductions as “a horrible subsidy aimed to placate high-tax states.” Deroy Murdock, writing for the National Review, said the repeal of state and local tax deductions would be an incentive for states and communities to bring down their own tax rates to prevent wealthier residents from moving to areas with lower taxes.