If President Trump and congressional Republicans have their way, homeownership in California will become less attractive. And that really worries Realtors and builders.

And, of course, it also should greatly disturb home buyers.

The real estate and home building lobbies have historically supported Republicans. But now they’re hammering on the GOP about its tax proposals pending in Congress. And in California they’re targeting seven Republican U.S. House members who face potentially tough reelection races next year.

They’re trying to persuade the House members to turn against their party leadership, including Majority Leader Kevin McCarthy of Bakersfield, and reject both of the GOP tax proposals.


“If the goal of tax reform is to help middle-class Americans keep more of their hard-earned money, this proposal fails miserably,” the California Assn. of Realtors proclaimed in a full-page ad run in several California newspapers this week. “How could any member of the California Congressional Delegation think this plan is good for the Golden State?”

The ad was billed as an open letter to Trump and members of the California congressional delegation.

The seven Republican House members under pressure include five from Southern California: Darrell Issa of Vista, Dana Rohrabacher of Costa Mesa, Mimi Walters of Irvine, Ed Royce of Fullerton and Steve Knight of Palmdale. The two others are from the San Joaquin Valley: David Valadao of Hanford and Jeff Denham of Turlock.

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Especially caught in a bind between their party leaders and homeowner constituents are Republicans from Orange and San Diego counties, where housing costs are particularly high and homeowners would be hit hard. Issa, who represents San Diego County’s north coast, is the only California Republican House member so far to announce he’ll vote against the tax proposals.

The tax plans — one in the House, another in the Senate — would affect homeowners three ways.

The House bill would impact taxpayers who itemize on their federal returns and deduct mortgage interest. Currently they can deduct interest on mortgages up to $1.1 million. The House would chop that limit to $500,000 for future loans. The Senate bill would slightly lower the cap to $1 million.

The House bill also would kill off the mortgage interest deduction for vacation homes. The Senate proposal would keep it.



The Senate bill would eliminate the deduction for property taxes. The House would cap it at $10,000.

Right now, if you sell your house you can exempt $250,000 from capital gains taxation if you’re single, or $500,000 if married and filing jointly. That wouldn’t change under either bill. But both proposals would require you to have lived in the house five of the last eight years. Currently, you only need to have lived there two of the past five.

“The current limit is too low for Californians,” contends Steve White, a Studio City broker who is president of the state Realtors association. “In a high-priced state where we’ve already got a shortage of homes for sale, this simply traps people in their homes longer. Fewer people will move and that will just exacerbate the home shortage.”


Very possibly. And that also, of course, would cut into real estate agents’ commissions.

But there’s no question this tax legislation would change homeownership as we’ve known it, eliminating long-enjoyed financial benefits. We all remember the argument that motivated our first leap from renter to homeowner: At least we can deduct the mortgage interest and property tax.

The problem with the $500,000 limit on mortgage deductions is that in many areas of California, housing prices far exceed that amount.

In September, according to Realtors’ data, the median price of an existing single-family California home was $555,000, a 7.5% increase in the past year.


But in Los Angeles County it was $606,000. In Orange, $799,000. San Diego, $605,000. Going inland it was more reasonable: Riverside County, $386,000; San Bernardino, $279,000.

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Up north In the Bay Area, housing costs are out of sight. In San Francisco, a median-priced house cost $1.35 million. Marin was $1.25 million. San Mateo, $1.4 million.


To buy a median-priced house in L.A. County, you’d need a minimum qualifying income of about $120,000, the Realtors figure. In Orange, $159,000. In San Francisco, $276,000. In California generally, $112,000.

“Only about a third of California families can afford a median priced home,” Smith says.

And the Republican tax plan will reduce the incentives to sign up for a big mortgage. More than 4 million Californians currently claim mortgage interest deductions, averaging $12,000 per return according to the state finance department. Under the House bill, that would be pared back in pricey areas. And under the Senate bill, no property taxes could be deducted.

Granger MacDonald, chairman of the National Assn. of Home Builders, says the GOP plan “abandons the middle-class taxpayers in favor of high-income Americans and wealthy corporations… [It] eviscerates existing housing tax benefits.”


About 55% of Californians were homeowners entering 2017, down from a historic peak of nearly 61% in 2006 before the recession. The low was 43% in 1940 at the end of the Great Depression.

But the important thing for politicians today is that 62% of California’s likely voters are homeowners. It’s hard to believe that they’d be happy their deductions were sacrificed so corporate taxes could be substantially cut.

And they’ll be voting next November. Corporations won’t be.

george.skelton@latimes.com


Follow @LATimesSkelton on Twitter

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