Realtors See Bush Years as Beneficial for Housing Issues

SAN FRANCISCO — The morning after George Bush was elected to become the nation’s 41st President, some housing analysts said their worst nightmares were about to come true.

They predicted four more years of cutbacks in popular programs run by the Federal Housing Administration and other agencies, further reductions in housing subsidies for low-income people, and the continuation of Reaganesque economic policies that some say have led to the nation’s staggering budget deficit and kept mortgage rates higher than they need to be.

Much-Needed Relief

But now, after nearly two weeks of analyzing the outcome of the elections and listening to a President-elect who’s using a fairly moderate tone, some experts are saying that the Bush years could bring bright days for the nation’s homeowners and provide some much-needed relief for first-time buyers and homeless people.

“The Bush Administration is not going to be the death knell for housing,” said Stan Ross, co-managing partner of the real estate accounting and consulting firm Kenneth Leventhal & Co. “In fact, I think it’ll go down as accomplishing more on the affordable-housing front than any other administration in history.”

Realtors, lobbyists and housing analysts who attended the National Assn. of Realtors’ (NAR) convention here last week based their rising optimism on a combination of factors.

Follow Economic Policies

First, there’s Bush’s specific campaign pledge to preserve tax deductions for mortgage-interest payments and his vague promise to provide “more support for housing.” He has also promised not to raise taxes.

Bush last week also said he’ll keep Treasury Secretary Nicholas F. Brady in his current post, further evidence that the President-elect plans to follow the same economic policies promoted by the Reagan Administration. Supporters of those policies claim they have helped bring down inflation and mortgage rates from their record levels of the late 1970s and early ‘80s.

But much of the upbeat thinking among pro-housing forces stems from the extra seats that Democrats captured in both the U.S. Senate and the House. Democrats are generally considered to be more supportive of housing-related legislation, and the new seats they won could make it easier to push through housing bills and override potential vetoes.

The combination of a stronger Democratic Congress and a moderate Bush--a President who isn’t as popular as Ronald Reagan and thus won’t be able to rally the public behind him as easily--”could lead to a great four years for housing,” one realtor at the convention said.

Low-Down-Payment Loans

The Democrats’ strengthened hold on Congress bodes particularly well for the proposed “National Affordable Housing Act,” a potentially far-reaching housing bill being drafted by U.S. Sens. Alan Cranston (D-Calif.) and Alfonse D’Amato (R-N.Y.). The NAR and many other real estate trade groups support most of the concepts in the draft.

Among other items, the draft calls for making low-down-payment Federal Housing Administration loans available to more buyers in high-cost housing states, such as California. It would also allow would-be buyers to put a portion of their earnings in a tax-deferred savings account that could eventually be tapped to make a down payment on a house.

People who already have individual retirement accounts would be allowed to withdraw their money whenever they want, as long as the cash is used to make a down payment.

The bill is expected to be introduced next year, and the extra seats that the Democrats picked up in Congress should strengthen its chances of passage.

Capital Gains Tax

“Even if the bill fails, we might be able to pull out the best parts of it and get it passed by Congress,” said John Blount, a realtor lobbyist.

But the Democrats’ stronger hold on Capitol Hill may work against another cause supported by realtors: reinstating the preferential tax treatment of capital gains.

Under previous tax law, profits from the sale of investment real estate, stocks and many other items were taxed at a special, low rate. But those breaks were eliminated in 1986, when Congress overhauled the nation’s tax codes.

Bush wants to reinstate those tax breaks--a proposal that has the backing of realtors--because he believes it would generate more sales and result in more revenues for the government.

Mortgage Deductions

But many Democrats and even some Republicans question that logic, and say that reinstatement would primarily benefit wealthy individuals who own huge stock and bond portfolios or apartment buildings.

It’s also unclear whether the larger Democratic majority will help or hurt the realtors’ battle to preserve deductions for mortgage interest payments. Some Democratic lawmakers have suggested limiting such write-offs in an effort to raise more money for the deficit-plagued Treasury.

During the campaign, Bush repeatedly pledged to “uphold the home mortgage interest deduction.” But another of his campaign pledges--”no new taxes”--may leave Congress little choice but to cut back on those write-offs.

“Preserving those deductions is our No. 1 priority as we move into ‘89,” said Nestor Weigand, this year’s NAR president. “Homeownership accounts, capital gains, the FHA--they’ll all take a back seat to the mortgage-interest issue.”

New HUD Secretary

Here are some other key housing issues facing the next President, and how George Bush is expected to deal with them:

--Pick a new secretary for Housing and Urban Development. Bush appears certain to replace Samuel R. Pierce Jr., the present secretary, whom some critics call a “do-nothing” Cabinet member who hasn’t fought cutbacks in his budget hard enough.

Possible candidates for the job include Cleveland Mayor George Voinovich--whose strong support for various housing-related programs has garnered backing from many realty group officials--and Robert De Monte, the HUD regional administrator in San Francisco who also has extensive experience in the private sector.

“The ‘wild card’ is that Bush will use the job as a political plum rather than give it to the most qualified person,” said one Washington insider at the convention. One newspaper recently said the HUD post may go to longtime Bush supporter Thaddeus Garrett or to Debbie Steelman, Bush’s campaign-issues director.

--Public housing. Although the new HUD chief will be in charge of executing the Administration’s housing policies, he or she will be taking directions from the top. Like Reagan, Bush opposes construction of public housing projects owned and managed by the federal government. Instead, he favors expansion of the controversial “voucher” program in which poor people seek out apartments owned by private-sector landlords and then use the government voucher to pay for part of their rent.

--Homelessness. Bush has already called for full implementation of the Stuart McKinney Act, which provides funds for shelters, single-room occupancy housing, drug and mental-health counseling, and other items.

But some Democrats and housing activists say the act doesn’t provide nearly enough money to solve the homeless problem. Finding more cash to fund such programs will be tough--”one housing issue that the Democrats and Bush are really going to butt heads on,” said one lobbyist--because of the nation’s $150-billion budget deficit.