|GOP Releases Tax Plan, Cutting Corporate and Some Middle-Class Taxes
Republican lawmakers unveiled the most sweeping rewrite of the tax code in decades, outlining a $1.51 trillion plan to cut taxes for corporations, reduce them for some middle-class families and tilt the United States closer, but not entirely, toward the kind of tax system long championed by businesses, according to talking points circulated on Thursday.
The House plan, released after weeks of internal debate, conflict and delay, is far from final and will ignite a legislative and lobbying fight as Democrats, business groups and other special interests tear into the text ahead of a Republican sprint to get the legislation passed and to President Trump’s desk by Christmas.
“This is a good start to a pro-growth tax reform process,” says The Collingwood Group Chairman Tim Rood. “Doubling the standard deduction, lowering the individual tax rate for low- and middle-income families and keeping the deduction for state and local property taxes will keep more money in folks’ pockets, which works well for housing and homeownership. I’m pretty sure there will be lots of amending and lobbying done to address the cap on mortgage interest deduction and the repeal of state and local income tax deduction.”
Rep. Kevin Brady, R-Texas, who chairs the House Ways and Means Committee, said the bill is estimated to cost $1.51 trillion over a decade. Lawmakers must keep the cost of the bill to $1.5 trillion if they want to pass it along party lines and avoid a fillibuster by Democrats. Lawmakers have been scrambling for days to find a way to make cuts that are expected to cost trillions of dollars into a $1.5 trillion hole. That has prompted a host of changes on the corporate and individual side, including a new twist that would limit the mortgage interest deduction by capping it at $500,000.
“This isn’t the last product,” said Rep. Carlos Curbelo, Republican of Florida and a member of the House Ways and Means Committee. “This is just the kickoff to this tax reform exercise.”
read more: NYT
Tax Reform Plan Halves the Cap on Mortgage Interest Deduction
America’s popular mortgage interest deduction is about to lose a lot of its punch.
The House Republican tax plan halves the cap on the deduction of mortgage debt for newly purchased homes to $500,000. It does, however, maintain the current deduction of up to $1 million in mortgage debt for current homeowners.
The plan also nearly doubles the standard deduction, meaning fewer taxpayers would itemize and take the mortgage interest deduction. Currently, about 21 percent of filers take the mortgage deduction, but under the new framework only about 4 percent would, according to recent estimates from the Tax Policy Center.
The Republican plan also allows state and local property tax deductions of up to $10,000.
This will hit the Northeast hard — New Jersey, New York and Connecticut have some of the highest property tax rates and the highest-priced homes. It will hurt less for states in the South, where tax rates and home prices are low. Hawaii does have the lowest property tax rate in the nation but the highest median home price. Washington, D.C., is much the same. California falls in the middle on property tax rates but has some of the highest home prices in the nation.
read more: CNBC
Putting on Developers’ Hard Hats, Private Equity Managers Break New Ground
In real estate, the money guy is not usually the construction guy — but that might be changing.
With the U.S. federal funds rate languishing near zero, real estate private equity funds have had to overturn more rocks to find deals that can achieve the lofty yields their investors demand. That used to mean — at most — buying marginal structures, some of which would need extensive renovation before they could be sold at a profit.
However, more recently a growing number of private-equity managers are putting aside their spreadsheets and picking up a shovel, developing lots from the ground up to seize opportunities for outsized yield.
The experience of Los Angeles-based RedBridge Capital typifies why that approach can be so attractive. Rohan Gupta, the firm’s head of asset management, explained to Commercial Observer that his extensive experience in what he called “deep” property renovations gave him the confidence to dip his toes in new construction.
“We’re still pretty judicious in what we’re buying,” he said.
Examining the national market for student housing, Gupta found that, on some campuses in the U.S. Southwest, there were more than 10 students per available bed.
That made development at the University of Nevada, Las Vegas an easy choice. “We really like universities in core cities. We want to be in locations that already have existing housing pressure,” Gupta said.
read more: Commercial Observer
Freddie Expects Hurricane Losses, but Still Reports $4.7 Billion Profit
A private-label securities settlement, portfolio asset sales and greater interest among smaller lenders helped Freddie Mac compensate for potential losses stemming from the catastrophic hurricane season, the mortgage giant said Tuesday.
Freddie Mac reported comprehensive income of $4.7 billion for the third quarter despite also reporting a $900 million pretax provision for potential hurricane losses. The provision for hurricane-related losses — stemming from damage caused by Hurricanes Harvey, Irma and Maria — translated to $600 million after taxes.
“About two-thirds of this additional reserve is related to Maria because at this time we expect a considerably higher severity of losses in Puerto Rico and the Virgin Islands than on the mainland,” Freddie Mac chief executive Donald Layton said in a conference call with reporters. “We have much less information on the islands and the information we have shows a much worse situation.”
But Freddie’s earnings from the third quarter benefited from a private-label securities settlement that resulted in a $2.9 billion after-tax gain. The government-sponsored enterprise also benefited from tightening market spreads and the sale of assets from the agency’s mortgage investment portfolio.
“We are very happy with our performance,” Layton said.
The chief executive also noted Freddie is attracting more small and midsize lenders to use its cash window. Both small banks and nonbank mortgage lenders rely on Fannie Mae and Freddie’s windows to turn loans into cash.
read more: American Banker
Six Target Areas for Higher-Performing Homes
The reNEWable Living Home is a textbook example for energy performance.
Home performance can now have one of dozens of labels attached to it, or it can actually perform above expectations and beyond certification level.
And that’s exactly what the reNEWable Living Home intends to do. CR Herro, vice president, environmental affairs at Meritage Homes, never stops imaging the future. His passion for better home performance is driving the 2018 BUILDER Concept Home.
When planning the reNEWable Living Home, Herro and his team worked on six target areas, which you can also see on a downloadable infographic that you can find by linking to the original article.
read more: BUILDER Online
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