The housing supply has fallen to a historic low. Builders have not been able to keep pace with demand, resale stock is in short supply due to many social and economic factors, and the demand for housing from the millennial generation continues, with a younger generation of Zoomers right behind them.
Affordability at all levels remains a challenge, the diversity of housing stock as means of allowing greater affordability continues to be a problem, and public officials are searching for answers in zoning, construction, tax credits, and repurposing of commercial office space as a means to boost supply and affordability. All of these efforts are important, but there may be, yet another means of restoring harmony and balance to this supply equation.
What we are proposing is a moratorium of two years at the federal level on the capital gains tax for real estate as a possible means for increasing supply, easing demand, offering more opportunity and selection, and just perhaps, returning appreciation to a more acceptable norm.
The Boomer generation is one of the wealthiest, and has a lot of investment property, much of which falls into the affordable housing range, under $1.2 million in urban and metro areas. Many (not all) are hanging onto this property because of the 15% capital gains tax at the federal level, combined with the 5% capital gains tax at the state level, and a depreciation tax on top of this, making selling too expensive and egregious.
By having a finite period of two years in which to financially motivate these individuals to sell, the housing market could be made to resemble a four- to five-month supply and force the market to return to some level of normalcy. This solution, however, must be implemented with considerable care and oversite so as to avoid flooding the marketplace and causing another housing recession.
There would need to be a set of parameters that the moratorium would follow:
- Only persons over 78 years of age or persons qualifying under Medicare as disabled could sell their principal residence, and benefit from the tax moratorium. This is to incentivize seniors to move to smaller residences, over 55+ communities, retirement, or nursing facilities to free up housing stock for the generations below them. While persons who sell their principal residence receive a tax exemption on $250,000 single or $500,000 married, this is insufficient for most seniors who own their homes outright.
- Only persons, or corporate entities owning less than 12 investment properties could benefit from the tax moratorium. If the number of investment properties exceeds 12 in their respective portfolio, then they would be allotted the benefit on up to 12 properties but no more. This is to allow institutional investors who purchased so much of the affordable housing stock during the 2009-2011 recession to participate and reap the benefit of the tax gain and simultaneously provide more options to first time homebuyers.
- If they own six or more in one jurisdiction, county or locale, they would not be allowed to list and sell all at one time, but intermittently selling all six over a period of one year but never more than two at one time could be actively listed for sale. Total sales for one entity or person could not exceed 6 sales in one location for any given year. This would not apply to properties located in different parts of the state or country. For example, if a person owned 12 homes in 12 different states or 12 different counties in the same state, they would be allowed to sell all at the same time. However, preferably there should be a quota of half the first year and the remaining portion the second but that can be debated.
- During the two-year moratorium, the revenue from the state capital gains tax would naturally increase due to the number of homes being sold, and a percentage of that tax revenue should be allocated to affordable housing programs in jurisdictions with the highest employment rates and salaries, and the greatest need for affordable housing to persons earning 60% or less of the area median income. By allocating a large portion of the tax revenues, these programs could be more generously funded, helping them to achieve their goals.
At each four-month interval during the two years, the program would be re-assessed for its efficacy. The parameters would be re-evaluated to ensure they are not producing a deluge of homes coming to market, nor a shortage. The numbers could be adjusted up or down, or not at all, based on what the national housing data is showing.
The program could be regulated by the Department of Housing and Urban Development, which would have the right to change the parameters if the program needs to be accelerated or decelerated based on the number of homes coming to market or languishing on the market; it could do so by issuing a change at the end of each fourth month cycle. Because real estate is hyperlocal, each state would have the right to end participation at the end of each six-month interval during the two-year moratorium.
While this program could be very successful for some states suffering from a lack of inventory, it could be potentially catastrophic for the sun and sand states of California, Nevada, Arizona, and Florida which have a larger number of seniors living in them, as well as investment properties. By allowing the individual states to have control over the implementation of the program, it would help to mitigate the risk of flooding the market and manage the intended results of the program.
There are definitely more parameters or control measures that might be added, or considered, but this paper is only intended to spark imagination, debate, and just maybe implementation and passage at the federal and state levels if deemed appropriate. So, thank you for reading, and I hope to hear back from you. All input and feedback are appreciated.
Barbara G. Johnson is an associate broker with Long & Foster in McLean, Virginia.
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As a Realtor and a senior, the appropriate age for this plan would need to be starting at age 70. After being in a home for many years, it is difficult and stressful to leave an area and start over, not to mention the effort in preparing a home for resale, searching for a new home, packing up, and moving your belongings, and setting up the new home. At 78 and before, health issues begin to appear and at some point, seniors just elect to remain in their present home and avoid all the trouble.
These are all factors that must be considered while deciding to move.
In my opinion, a person needs to be younger to undertake such a big change.
Medically speaking, if the move involves a new area, this also means finding new doctors for all types of health concerns. That, in itself, is a major concern for those of us who are considering a change of area.
Obviously, one can go on and on regarding the concerns of affordable senior housing. If more new construction is available to seniors in a safe area near hospitals and transportation, this would go a long way in persuading seniors to move on to their new home.
Investors should be exempt. The focus should be on everyday Americans wanting to sell. Investors have created enough issues in the housing market thus far. Let the regular folk have their time for now.
You’ll own nothing and youll be happy. Repurposing commercial properties to be future housing benefits the agenda2030 plan; move the populace to urban areas where they can be more easily controlled+monitored—15 minute cities. Covid was a multi pronged plan to depopulate & further unfold agenda2030 – the great reset.
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MARCH 12, 2023
DEALING EFFECTIVELY WITH THE AFFORDABLE HOUSING CRISES
Naïve and unrealistic expectations most often result in losses and disappointments. Such it is with the premise that affordable housing has a direct solution within new construction. New construction costs are at an all time historic high and a more realistic, appropriate, and strategic housing solution must be adopted or society will insanely keep doing the same thing expecting different results.
WHERE IS THE MOST AFFORDABLE HOUSING: The answer is simple; it’s within the existing housing stock and the most potential for re-positioning such housing lies in the now dysfunctional homes currently occupied by older adults. With advancements in medicine and a shift to less intensive physical work (which literally wore out people’s bodies), the Baby Boomers are now living a third of their lives past 65 and encountering new needs not previously encountered or anticipated. At age 80 people need three times as much light as they did at age 20. Two story structures, narrow stairways and hallways, dysfunctional bath rooms and poor and unsafe ventilation are just some of the life complicating nuances which no longer meet the functional needs of older adults.
PREMISE: If better housing coupled with needed life style and life enhancing solutions were created and effective in better serving older adults, older adults would move while freeing up “affordable housing”. If older adults find and move within their community to more acceptable housing (especially with beneficial programming, socialization, and meaningful involvement), then young families could purchase, upgrade, and renovate these dysfunctional homes while improving the neighborhood and increasing the tax base for the community while also reinforcing the operating economies of scale of the now challenged school systems.
There are two issues that I see right away. First is that this is geared towards rental properties that are more than likely occupied. A landlord would have to wait until the lease is up and be able to have the tenant move out willingly. Then the owner would have to make all repairs or fully remodel the property so a first time home buyer could get financing. Depending on how much time is left on the lease a two year timeframe could be very tight. The other issue is now those tenants will have to find a new place so the demand for the remaining rental units will increase causing prices for rent to go even higher. So yes you might ease up prices on homes for first time home buyers there will be more of a burden on remaining renters. One step forward, two steps back.
Now could this be coupled with other ideas and be made to work? Absolutely! However until local and state governments realize that their minimum square feet requirements, zoning requirements, parking requirements, set back requirements, etc are really the heart of the issue then I didn’t think we can make an impact on this issue any time soon.
there are senior relo businesses that can take the stress out of the process…not sure of the fee..interested seniors can get free consulting appointment.
For all Fannie, Freddie, and HUD repo’s. all has 2 year deed restrictions to homeowner occupants only and no corporate/investor purchases for the next 3 years starting this year. for the purpose of
1. increase homeownership.
2. decrease appreciation rate. home value has increase 30–50% within the last 3 years, yet wage increase is less than 10%
3. increase inventory