GOP tax bill spells potential trouble for Conn. home-owning
From high-end to mid-range to affordable, the housing market in Connecticut is likely to be jolted by Republican tax legislation — and not for the better, in the judgment of real estate professionals and Democratic lawmakers.
“For Connecticut, this tax bill is particularly onerous,” said Michael Barbaro, president of Connecticut Realtors. “If you take away the ability of people to write off taxes and mortgage interest, you’ll start to see increased migration out of the state. This is just disastrous for us.”
The exact impact remains unclear as Republicans in House and Senate confer to their respective bills and present the joint package to President Donald Trump for his signature. The Senate passed its version in the wee hours of Saturday morning, while the House passed its measure Nov. 16.
Much depends on which features of the two bills are incorporated. The House bill, for instance, caps the mortgage interest deduction of new home loans at $500,000, while the Senate bill leaves the threshold at its current $1 million level.
Both bills eliminate the deductions for state income tax payments, and cap the deduction for property taxes at $10,000. In varying degrees they roll back tax credits and incentives used to build affordable housing for low-income families in Bridgeport, New Haven and elsewhere in the state and nationwide.
“It’s going to make an already difficult job that much more difficult,” said Rep. Jim Himes, a Democrat whose district includes Bridgeport.
The statewide median home-sale price in Connecticut is $250,000 for October this year, according to Connecticut Realtors data. That’s up 2 percent from the same time last year.
But in Fairfield County, the median selling price is closer to $450,000, according to the Sotheby’s branch that specializes in high-end home sales in Fairfield County and neighboring Westchester County, N.Y.
And, according to Sotheby’s, the higher up the high-end you go in Fairfield County, the higher the home prices — $1.2 million in Westport, $1.4 million in Darien and $1.7 million in Greenwich.
But even at the mid-level of $500,000 to $700,000 — “starter homes” in Fairfield County, according to Barbaro — the GOP tax bill holds few incentives for homeowners.
Connecticut property taxes are ranked the fourth highest in the nation, according to the nonpartisan Tax Foundation.
According to a sliding scale on SmartAsset.com, the $10,000 mark (over which property taxes are no longer deductible under the GOP bills) hits assessed home values between $600,000 and $650,000.
So the owner of a $1 million home in Fairfield County — arguably still a middle-class home by Connecticut standards — would pay more than $16,000 in property taxes, $6,000 over the GOP $10,000 limit.
The National Association of Realtors calculated the potential limits on property tax and mortgage interest deductions would reduce home values by an average of $50,000 in the 4th Congressional District (represented by Himes) and $27,220 in the 5th Congressional District (represented by Rep. Elizabeth Esty, also a Democrat).
“People in Connecticut are going to have to pay more burdensome taxes and that will diminish the value of their homes,” said Sen. Richard Blumenthal, a Greenwich resident, at a news conference in Hartford on Monday.
Sympathy for high-net-worth homeowners may be in short supply, especially from Democrats. Reports by the nonpartisan Congressional Budget Office and Joint Committee on Taxation in the past two weeks have concluded most of the GOP tax bills’ benefits flow to the wealthiest tax brackets, not those of the middle class or low-income.
Even so, the potential limits on property tax and mortgage-interest deductions may hit the high-end hardest. But the trickle-down will likely impact the nearby mid-level homeowner as well, according to Scott Cooney, a Realtor in Danbury and incoming vice president of Connecticut Realtors.
“On Candlewood Lake, waterfront property is desirable and people pay more for it,” he said. “So if those prices go down, it’s going to affect the value of properties not on the water. It’s a cascading effect.”