From the New York website: The National Association of Realtors is not only the largest real estate lobbying force on the Hill, but one of the largest lobbying groups period.
A trade association of more than 1 million members, the NAR functions in part as a regulator of the brokerage industry, setting the rules for how brokers use Multiple Listing Services. (In New York City, REBNY, which seceded from NAR in the 1990s, maintains its own service.) NAR’s membership is mainly composed of residential and commercial brokers, but its lobbying arm is active on just about every political issue that touches real estate. According to an analysis from the Center for Responsive Politics, the group spent more than $64 million on lobbying activities in 2016, the second most of any group in any industry.
Jamie Gregory is NAR’s deputy chief lobbyist and has worked for the organization since 1994. As the majority-Republican Congress winds up to make big legislative changes with President Trump in the White House, Gregory and his team are focused on three major issues that they expect will dominate the real estate agenda in Washington for the next two years. The National Flood Insurance Program, which provides affordable flood insurance to millions of property owners nationwide, is set to expire in September, and some Republican congressmen have expressed interest in making deep cuts to the program. On tax reform, proposals from last year’s House blueprint have yet to be updated to clarify what happens to benefits that incentivized real estate investment. And as far as what happens to Fannie Mae and Freddie Mac, that’s going to take a little longer to work out a solution.
The Real Deal recently caught up with Gregory to discuss these issues and more. (The interview was edited and condensed for brevity and clarity.)
You’ve described reauthorization of the National Flood Insurance Program as a top legislative priority. What are the current political barriers to that?
Barriers might be too strong a word, but there’s two things. One, there’s the fiscal aspect. The program does have a deficit of approximately $25 billion, provisionally from Katrina and Rita and those storms. It was being paid down, but then Sandy put it back up again. So there is a debt to the U.S. Treasury that has to be recovered. The second issue is that there is a school of thought on the hill that the program should be privatized. As an organization, we’re open to some privatization or some increased private insurance in the marketplace, but we don’t think you can privatize it [entirely].
In the past, House Financial Services Committee Chairman Jeb Hensarling (R-TX) talked about wanting to shift more of the flood insurance market to the private sector. Will he be the key figure in how this plays out?
Rep. Sean Duffy (R-WI) is now the chair of the Housing and Insurance subcommittee, and Chairman Hensarling has really deputized Duffy to take the lead. In the previous congress, the subcommittee chair was Rep. Blaine Luetkemeyer (R-MO) and in December he put out a whole list of principles he thought should be followed. Duffy is taking those principles and collecting input from outside groups, members of Congress both on and off the committee with an interest in floods. At the moment, we’re kind of at an early stage here. We’ve met with his staff, we’ve talked about the principles. I wouldn’t say we’ve gotten to a roadblock. We’re communicating, trading information. We’re trying to be a resource for the questions that they have.
We’re asking for another long-term reauthorization to provide stability. The reason for that was that, in the early to mid-2000s, over the course of about seven years, the program was allowed to expire eight times. One of the expirations was lengthy and our analysis at the time was that there were 40,000 transactions per month that were either delayed or canceled because homeowners couldn’t get flood insurance and lenders were requiring it.
Comprehensive tax reform could eliminate deductions and deferrals that incentivize homeownership and real estate investment. Would you say you’re playing defense on tax reform right now?
Yes, I think that’s fair, although we don’t have legislative language yet. We don’t even have a discussion draft. We’re all basing our comment on the House blueprint, which was released in July and was essentially drafted by Speaker Paul Ryan (R-WI), House Ways and Means Chairman Kevin Brady (R-TX) and others. We’re basing our comment on that. We’re concerned about the elimination of the incentives for homeownership based on the blueprint. Granted, we understand the blueprint was a campaign document geared toward the November elections, so now we’re anxiously awaiting seeing some kind of legislative product that we can fully analyze and fully comment on.
So the fact that it was a “campaign document” means that some of it should be negotiable now?
The House blueprint on tax reform called for doubling the standard deduction, which many say would render the mortgage interest deduction useless.
This goes to the heart of doing away with the incentives. In the blueprint language, there are only two deductions that are retained and all other deductions are eliminated. The two deductions are charitable contributions and the mortgage interest deduction. The problem is that most people who currently itemize don’t get to the point where itemizing is more beneficial than the standard deduction until they own a home. It’s a combination of the mortgage interest deduction and the state and local property tax deduction that gives them that benefit. The blueprint eliminates the state and local property tax deduction and doubles the standard deduction but in doing that, according to their own analysis, less than five percent of tax filers will itemize. So while in name you’re retaining the mortgage interest deduction, in reality no one is going to use it.
So what’s the big deal?
You’re not making any difference between renting and owning, and the question is: do we want to be a nation of renters or do we want to be a nation of owners?
What about keeping the tax deferred 1031 exchange? The House blueprint was silent on this. Do you have any update on how 1031 will be affected in a draft tax reform bill?
The blueprint doesn’t mention 1031. The concern in the industry is that (now former) House and Ways Committee Chairman Dave Camp’s (D-MI) proposal from the last Congress did eliminate 1031s. In this town, once an idea gets out there, sometimes it never goes away. Chairman Brady spoke to our policy conference last week. When he was asked about 1031s, I think his response was that everything is on the table, so he didn’t specifically say and he’s taking input from people. So we’re up there talking about the economic value of 1031 exchanges and why we think they should be retained.
What are the must-haves in any reform of Fannie Mae and Freddie Mac?
We believe that whether its Fannie Mae or Fannie Mac or a new entity, there has to be an explicit government guarantee. Long-term fixed rate mortgages — 10-year, 20-year, 30-year — are all a product of the government guarantee. I do think this will come third (after flood insurance and tax reform). Chairman Hensarling wants to introduce his own version of GSE reform. Senator Mike Crapo, who chairs the senate banking committee now, has also said GSE reform is on his agenda. We’ll see legislation introduced and we’ll see hearings this year, but I think ultimately it’s far more likely a bill passes next year.
What would you say to Realtor members who say you spend too much money on lobbying?
Legislative advocacy, political advocacy is one of the services our members value the most when we talk to them about membership. When we survey them, advocacy is always near the top of the list, if not first then second. There’s a lot of reports about how much we spend on advocacy. Some of that, a big chunk of that, which puts us high in the list, is our activity on the state and local level, so it’s not all federal.
Our members are the practitioners. They’re the folks that are on the ground. I almost hesitate to say this, but for example, when GSE reform came up last time, there would be panels of think-tank folks who, if we lived in an economic vacuum, [what they proposed] would be ideal. And then inevitably there’d be a second panel of practitioners who would say “OK that’s great, but here’s how the real world exists.” Our guys are the real-world witnesses, which I think is part of our strength.