Real Estate Wins in Government Spending Bills

December 17, 2019

The House on Tuesday passed a federal spending package for fiscal year 2020 that includes several high-priority items for REALTORS®: reauthorization of the National Flood Insurance Program through Sept. 30; an extension of several tax provisions important to real estate markets, such as mortgage debt forgiveness; and a seven-year reauthorization of the Terrorism Risk Insurance Program, a particularly significant victory for commercial real estate practitioners.

The spending package now goes to the Senate for approval, and President Donald Trump is expected to sign the bills by the end of the week.

“Confidence and stability are two of the most critical factors impacting America’s housing market and economy,” NAR President Vince Malta said in a statement. “Fortunately, this funding agreement delivers that certainty to NAR’s 1.4 million members and the clients they work hard to serve every day. The National Association of REALTORS® fought to eliminate short-term questions surrounding the status of the National Flood Insurance Program, federal terrorism insurance, and various tax provisions—all of which will allow our members to plan better, minimize stress for prospective home buyers and sellers, and keep our nation’s economy moving forward. While NAR applauds today’s votes, we urge Congress to use the time afforded by this agreement to work toward sustainable, bipartisan solutions to programs like the NFIP, which protect millions of Americans every year.”

Still Eyeing Long-Term Flood Insurance Solution

The nine-month extension of the NFIP—which has operated on a string of short-term extensions and endured multiple lapses over the past two years—prevents the disruption of thousands of real estate transactions, 1,300 of which would be in jeopardy each day if the program were to expire, according to research from the National Association of REALTORS®. Still, remaining uncertainty about the future of the NFIP means lawmakers must use this time to work toward long-term reauthorization and reform, NAR says.

The association supports the NFIP Reauthorization Act, which includes a five-year reauthorization of the program, along with reforms to improve flood mapping, enhance mitigation, and remove obstacles to private flood insurance. The bipartisan bill, which still has hurdles to clear in Congress, strikes a delicate balance between NFIP sustainability and affordability, NAR says. The association will continue to push lawmakers to find compromise on a longer-term reauthorization and reform package.

Floods are not just a coastal issue: In fact, 98% of U.S. counties have had at least one federal disaster declaration since 1996, according to NAR data. Without reforms, the NFIP’s ability to continue providing critical protections to people across America is in doubt.

Extension of Important Tax Incentives

Included in the spending package are temporary extensions of three tax provisions directly impacting the real estate industry:

  1. The exclusion of forgiven mortgage debt from gross income, meaning that owners of primary residences who sold them short and had part of their mortgage debt written off will not have to pay tax on the amount forgiven.
  2. The deductibility of premiums for mortgage insurance.
  3. The deduction of the cost of improvements to commercial buildings that make them energy efficient.

These provisions had all expired at the end of 2017. Tuesday’s agreement extends them, retroactive to the beginning of 2018 and through the end of 2020.

Terrorism Insurance a Win for Commercial Pros

The seven-year reauthorization of TRIP is significant for NAR, as terrorism risk insurance is often required to secure necessary financing for commercial properties. TRIP was facing expiration in 2020, and the reauthorization comes after NAR publicly supported the Terrorism Risk Insurance Program Reauthorization Act of 2019.

Absent TRIP, the country would likely see a repeat of what happened in 2001, when many insurers raised terrorism risk insurance to unsustainable prices or stopped offering coverage entirely after the Sept. 11 terrorist attacks in New York. NAR says the long-term reauthorization will provide stability to the commercial real estate industry while playing a critical role in U.S. national security.