If you take mortgage interest tax deductions, the next 100 days could have significant financial
implications for you, thanks to Congress’ new federal debt ceiling plan.

Though the compromise legislation itself involved no new taxes, it created an unusual
mechanism — an evenly split, 12-member bipartisan super-committee — that could call for
major cutbacks on real estate write-offs by Thanksgiving.

All it will take is a single vote by a lone senator or House member who breaks with his or her
party to put the mortgage interest deduction into serious play.

Here is what’s about to unfold and how it could affect you: The legislation signed by the
president Aug. 2 calls for a two-step increase in the federal debt ceiling plus spending cuts of
about $917 billion. It also created the Joint Select Committee on Deficit Reduction with the goal
of slashing an additional $1.5 trillion from the deficit over the coming decade. [more]

President Obama and Midtown Manhattan

Now that the debt ceiling has been raised and budget cuts have been agreed upon, the real estate industry’s focus shifts to how the new legislation will affect the commercial market. And according to Chris Macke, a senior real estate strategist at the CoStar Group, in an article for Forbes, that all depends on whether the economy has slumped because of a reduction in demand, or because federal spending has corporations concerned over forthcoming tax hikes.

If it’s the former, then the commercial real estate market could be in for a rude awakening. With the federal government spending $2.7 trillion less over the next decade, or $270 billion less per year, many private sector companies who do big business with the government will find their revenues slashed. In that case, corporate America certainly would not increase hiring and demand for commercial real estate would be stifled. [more]

From left: Steven Spinola, president of the REBNY; Eric Anton, executive managing director at Eastern Consolidated; Debra Shultz, managing director at Manhattan Mortgage; David Heiden, a principal at W Financial and Barry Sternlicht, chairman and CEO of Starwood Capital Group

As the debt ceiling debate nears a critical juncture in Washington D.C., real estate executives in New
York are concerned that absent a final resolution, the fragile recovery will be short circuited by a sudden
spike in interest rates.

Steven Spinola, president of the Real Estate Board of New York, the 12,000-member trade organization,
said the industry’s main concern is the impact a debt ceiling default could have on projects financed
with tax exempt bonds.

“If there is no agreement and our credit rating goes down, what will that do to interest rates?” Spinola
said. [more]