See what could happen next under the Trump administration as reported by Crains.
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As part of a national tax overhaul Congress is planning to curtail the ability to deduct mortgage interest and state and local taxes from federal taxable income. e Senate proposal would eliminate so-called SALT deductions entirely but leave mortgage interest alone. The House version permits up to $10,000 in property-tax deductions but allows interest only on the first $500,000 of new mortgages to be deducted, down from $1 million today. The pain would be greatest in places like New York City, where homes are expensive and income taxes are high. Mayor Bill de Blasio has noted that 617,000 city homeowners save $2 billion by writing off state and local income and property taxes.
The real estate industry says losing the mortgage interest deduction would make homeownership more expensive for future purchasers, and that would ultimately hurt the city’s 5.8 million renters. “If this goes on for a few years, it could knock people out of the box in terms of buying a home, especially if you throw in interest rates possibly rising,” said Jonathan Miller of appraisal firm Miller Samuel. If would-be buyers are pushed into the rental market, the increased competition for units could put upward pressure on rents.
Landlords’ ability to deduct property taxes on units they rent is not at risk, according to Abe Schlisselfeld, a partner in Marks Paneth’s real estate group who spent last week binge-watching House Ways and Means Committee hearings. But if landlords also live in the building, as is often the case in row houses across the city, they would be denied the property-tax deduction on the portion of the home they occupy. That extra expense could be passed along to tenants. But that hit would be tiny compared to the House plan’s impact on buyers who take out million-dollar mortgages. Either way, rents could go up, but that’s not bad news for everyone. “is would be great for developers who want to build more rental property,” said Ray Sturm, CEO of asset-management firm AlphaFlow, “as it keeps demand higher than it would otherwise be.”
A version of this article appears in the November 13, 2017, print issue of Crain’s New York Business.