A pair of legislative issues being discussed in Washington, D.C. could have a significant impact on the Wilmington-area housing economy, officials with the Cape Fear Realtors recently warned. While tax reform legislation could make it more difficult to deduct mortgage payments, failure for Congress to reform the National Flood Insurance Program could push insurance costs higher.
Congress passed its sweeping tax reform on Wednesday, Dec. 20. By changing how homeowners can deduct their mortgage payments on their taxes, the “Tax Cut and Jobs Act” could particularly hit some in Wrightsville Beach, said Shane Johnson, chief operating officer for Cape Fear Realtors, the organization formerly known as Wilmington Region Association of Realtors.
However, final changes made to the legislation on Monday, Dec. 18, could soften the blow to some local homeowners, as congressional bill writers modified the legislation to extend the mortgage interest deduction limit to $750,000, raising it from an earlier proposed cap of $500,000.
In New Hanover County, there are 2,752 homes valued at more than $750,000, with 730 being in Wrightsville Beach. The changes negotiated through the congressional conference committee, which serves to merge the variations between the House of Representatives and Senate legislation, would preserve mortgage interest deductions on second homes.
Johnson said that deduction is important for coastal, resort and destination regions like the Wilmington area, especially with a significant number of second homes.
“Taking that away could have a significant impact on investment in the area,” Johnson said, citing a recent report by the North Carolina General Assembly that showed New Hanover County had a property owner from every U.S. state except Montana.
The expiration of the National Flood Insurance Program is another pressing issue before Congress, which has been extended as part of a short-term government funding plan, though Johnson said that Congress needs to find a long-term solution to fix the ailing program.
At $30 million in debt, the flood insurance program needs to be reformed in a way to make it not only sustainable, but more fair, he said.
“Congress needs to figure out a way to fix it in a fair manner, one that doesn’t double rates in one year,” Johnson said. “It’s a huge insurance program that’s accumulated a huge debt. Some people are paying too much into it and some are not paying enough. It’s got to get evened out in a fair way.”
Johnson said that Realtors on both the local and national level are pressing for a system that would bring more homes and more competition into the program.
The U.S. House of Representatives in November approved a five-year extension of the program, with Rep. David Rouzer, R-N.C. voting to support the legislation.
“This bill included beneficial changes made in the past week at the request of me and other coastal members which will ensure that all homeowners in the 7th Congressional District will be treated fairly,” Rouzer said in an email to Cape Fear Realtors.
The changes to the flood insurance program enacted through the House bill include authorizing $1 billion to elevate or mitigate high-risk properties, capping insurance premiums at $10,000 a year, creating more opportunities for private flood insurance and addressing repeatedly flooded properties, which account for 2 percent of the program’s policies but 25 percent of claim payments.
“These changes would improve NFIP’s financial health, put consumers on a stronger footing, and deliver certainty to current and prospective homeowners. As a coastal community, this program is essential to our economic well being,” said Cape Fear Realtors CEO Taylor Oldroy.
