Housing market outlookHow new administration’s tax proposals could affect LI real estate

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President-elect DonaldTrump wants to raise the stan-dard deduction, which wouldblunt the benefits of deductinghome mortgage interest andreal estate taxes, and couldprompt more Long Islanders toseek out rentals, local real es-

tate professionals and businessleaders say.

The incoming administrationwants to raise the standard in-come tax deduction for marriedcouples to $30,000 from the cur-rent $12,600, according toTrump’s campaign website. Sin-gle filers could deduct $15,000,up from$6,300.

The Republican-led Con-

gress has indicated it is eager topass sweeping tax changes thatalso would increase standarddeductions.

Households filing their tax re-turns can choose either to takethe standard deduction or toitemize deductible expenses.Sharply raising the standard de-duction would mean that forsome taxpayers it would no

longer make sense to itemizedeductions such as mortgage in-terest, which is now deductiblefor up to $1 million in debt.

The fact that homeownerscan deduct mortgage interestand property taxes encouragesAmericans to buy homes, saidStephen Breitstone, vice chair-man of the law firm Meltzer,Lippe, Goldstein & Breitstone

LLP in Mineola. A typical LongIsland family earning about$100,000 and carrying a$300,000 mortgage will likelypay between $20,000 and$30,000 a year in mortgage in-terest and property taxes, sohomeownership lets themdeduct more on their federal re-

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turn and pay less in federaltaxes, he said.

For many taxpayers underTrump’s plan “you don’t getthat additional deduction any-more, so whether you rent oryou buy, your taxes are essen-tially the same,” he said.

The result, Breitstone said,is that “there would be less de-mand for homes and probablymore demand for rentals.”

Trump also would cap theamount that could be deductedat $100,000 for single taxpayersand $200,000 for married cou-ples. Trump’s choice for Trea-sury secretary, Steve Mnuchin,and House Speaker Paul Ryan(R-Wis.) also support limitingdeductions.

Scaling back the deductibil-ity of mortgage interest pay-ments and property taxes

could have “devastating im-pacts” on Long Island’s hous-ing market, Kevin Law, presi-dent and chief executive of theLong Island Association, theregion’s largest businessgroup, warned in a letter toTrump in December.

In the letter, Law urged himto either preserve tax deduc-tions for homeowners or atleast “take into considerationhigh-cost, high-tax regionslike Long Island before adopt-ing a uniform policy for the en-tire country.”

The Trump transition teamdid not respond to requestsfor comment.

Long Island’s housing mar-ket looms large in the fi-nances of local residents.More than 80 percent ofLong Island households owntheir homes — much higherthan the national rate of 63.5

percent, census figures show.Homes sold for a median

price of $335,000 in SuffolkCounty and $460,000 in Nas-sau County in November, theMultiple Listing Service ofLong Island reported.

On Long Island, home pricesand property taxes are “wayabove the national norm,” and“a lot of people are counting

on” the mortgage deduction,said Marianne Garvin, chief ex-ecutive of the Community De-velopmentCorp. of Long Islandin Centereach, which counselshome buyers and develops af-fordable housing. Curtailingthose deductions, she said,would “impact the homeowner-ship rate, especially on Long Is-land.”

Tax deductions help offsetthe high costs of propertytaxes, mortgage interest andhome maintenance, saidBethany Marten, broker andowner of the Home Buyers Re-source Center in Baldwin.

“In certain neighborhoods itliterally makes no sense to buya home because the taxes areso high that you might as wellrent,” she said. Reducing taxincentives for homeowner-ship, she said, “is going to de-press the market a bit. . . .What it will do is keep it onthe flat side.”

For many Long Islanders the

tax incentive for buying“weighs heavily” as they decidewhether to buy or rent, saidWendy Sanders, a real estateagent for Douglas Elliman inGreat Neck. “When you com-bine that with the increasethat’s expected in mortgagerates, it looks like it’s going tomake renting a more appealingoption,” she predicted.

Rentals costly on LIIt is more difficult and ex-

pensive to find a rental apart-ment on Long Island than it isin other New York City metroarea suburbs. Rentals make upabout 20 percent of the hous-ing stock on Long Island, com-pared with 37 percent in north-ern New Jersey and 34 percentin Westchester, a report lastyear by the Garden City-basedLong Island Index showed.

On Long Island, one-bed-room apartments rent for a me-dian $1,709 in Nassau Countyand $1,470 in Suffolk County,

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BREAKDOWNStandard deductionfor single filersCurrent: $6,300Trump proposal: $15,000

Standard deductionfor married filersCurrent: $12,600Trump proposal: $30,000Sources: IRS (current); Trump campaign (proposal)

How his proposals could affect LI real estate

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compared with $1,180 in north-ern New Jersey and $1,376 inWestchester, according to thereport.

Roughly 5,000 new rentalapartments have been built onLong Island since 2010, saidMitch Pally, chief executive ofthe Long Island Builders Insti-tute, a trade group. Less thanone-fifth of those are set asideas “affordable,” he said.

It remains to be seen whateffect limiting deductions forhomeowners would have onLong Island’s real estate mar-ket; cost is just one factor indeciding whether to rent orbuy, Pally said. But, he said, “Idon’t think there’s any ques-tion it will have an impact, es-pecially in a high-cost arealike where we live.”

If itweren’t for the taxdeduc-tions for homeowners, NelsonNuñez said he might have con-tinued renting an apartment inBrooklyn instead of buying ahome on Long Island.

Deductions an incentiveNuñez, 29, and his wife, Aki-

lah Lovell-Nuñez, bought athree-bedroom house inRockville Centre for $325,000in July, shortly before the birthof their son, Connor, now 4months. The fact that they candeduct more than $21,000 inmortgage interest and stateand local taxes was a key fac-tor in deciding to buy a home,Nuñez said.

If the standard deductionwere $30,000, he said, theywould likely take that stan-dard deduction regardless ofwhether they rent or own,Nuñez said. And without thatextra incentive to buy, he said,they might have stayed closerto his job as a project analystat American Express in Man-hattan.

“Renting would have been agreat way for me to keep theshort commute,” he said.

Some local tax and housingexperts predicted Trump’splan to overhaul the tax sys-tem would put more money inhome buyers’ pockets and givethe housing market a boost.Among other changes, Trumphas proposed reducing thenumber of tax brackets fromseven to three, and loweringthe current top income taxrate from 39.6 percent to 33percent.

“If he’s able to reduce thetax rates to the levels thathe’s talking about, I see thatas freeing up a lot of cash,”said Jude Coard, chair of thetax department at BerdonLLP in Jericho.

An analysis by Coard showsthe impact of the proposedchanges to tax deductions andincome tax rates on three theo-retical Long Island marriedcouples. The analysis does notinclude the impact of certainother proposals, such as child-care tax credits.

A couple earning $70,000,with a $200,000 mortgage,

could save about $900, sinceinstead of taking $17,000 initemized deductions, theycould claim the $30,000 stan-dard deduction, resulting inless taxable income.

For a household making$200,000, with $400,000 inmortgage debt, the amountthey pay in taxes would actu-ally rise by about $700, since

Trump has proposed eliminat-ing personal exemptions.(Under current law, taxpayerscan exempt $4,050 per per-son.)

And for a couple earning $1million, with a $1 million mort-gage, Trump’s plan would savethem about $32,000, due totheir lower tax rate.

Moreover, if Trump relaxes

regulations on lending, thatcould make it easier for LongIslanders to buy homes and“loosen up some funding fordevelopment,” said AnthonyBartone of Farmingdale-basedTerwilliger & Bartone Proper-ties.

Law, of the Long Island As-sociation, said in an interviewthat Trump’s reduced tax rates“should be a benefit to almostall Long Islanders, so we’recertainly supportive of that.”

But, he said, limiting deduc-tions — without setting differ-ent standards for high-cost re-gions — “would be an unfairburden to regions like Long Is-land.”

Interest rates risingChanges to tax policy would

come as the Island adjusts tohigher interest rates. The aver-age mortgage rate was 4.2 per-cent for the week ended Thurs-day, up 0.66 percentage pointsince Nov. 3, before ElectionDay, mortgage giant FreddieMac reported. With stockprices rising, some investorsare shifting money into equi-ties from bonds, which drivesup interest rates.

As interest rates rise, themortgage deduction becomes“very important to thosehome buyers,” said RobertDietz, chief economist for theNational Association of HomeBuilders. Raising the standarddeduction, he said, “would re-duce housing demand, and theimpact of that would be an im-pact on pricing and on thehomeownership rate.”

Even without the proposedchange to the standard deduc-tion, higher borrowing costs“are going to have a dampen-ing effect” on the local real es-tate market, since rising inter-est rates will make homes lessaffordable, said John Rizzo,the Long Island Association’schief economist.

That rising cost is likely toslow the growth in homeprices, or even keep them flat,Rizzo predicted.

Trump’s experience as abusinessman encouragessome experts. “He’s a builder,and that’s a positive,” said NeilGarfinkel, who is head of thereal estate practice at the lawfirm Abrams Garfinkel Margo-lis Bergson LLP in Great Neckand has advised the TrumpOr-ganization on legal matters.

Still, Garfinkel said of theproposed limits on deduc-tions, “Anything that takesaway from any purchaser’sability to purchase — it can’thelp.”

TaxdeductionshelpedNelsonNuñezandwife,Akilah,with sonConnor, buy theirRockvilleCentrehome.

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Long Islanders count on mortgage deductions, says Community Development Corp.’s Marianne Garvin.

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