As the U.S. House of Representatives considers a tax reform proposal, the details are being discussed in a number of circles, including the real estate industry.

If the proposal were to be adopted in its present form, there are concerns about its impact, which some industry leaders say could slash Florida home values by 13 percent.

Florida REALTORS® have expressed their concerns about a Republican proposal to reduce the tax deduction for mortgage interest, end write-offs for property taxes and boost capital-gains taxes on home sales, Maria Wells, president of Florida Realtors, told the Palm Beach Post.

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“That would affect the economy in all sorts of ways,” Wells said. “We know that housing is the canary in the coal mine.”

Proponents of the bill argue that less generous tax breaks for homeowners would be offset by a near doubling of the standard tax deduction, to $24,400 for married couples in 2018.

However, REALTORS® and a number of Democrats aren’t so sure. They contend that less generous tax incentives for homeownership could make homeownership less attractive both to first-time buyers and to second-home buyers.

“Most likely we are going to see a significant drop in the value of people’s homes,” said U.S. Rep. Lois Frankel, D-West Palm Beach. “Why? Because the demand for housing will go down.”

In its current form, the bill would allow home buyers taking out new mortgages to deduct interest on only $500,000 of debt, and only on one home. The package does not allow mortgage-interest deductions for second homes, or for home-equity loans.

Christopher Zoller, a REALTOR® with EWM and 2017 chairman of the Miami Association of Realtors, said the mortgage interest deduction is very valuable to borrowers.

“The deductability of property taxes, especially in Miami and South Florida, remains a big incentive and benefit to home ownership,” he said. “Home buyers in all price ranges will be less interested and incentivised to purchase if this proposal is enacted. Losing or limiting those deductions will not benefit home owners and buyers in South Florida.”

That is witnessed in the Senate version of the bill, which keeps deductions on a total of $1 million of loans on up to two homes.

Both the House and Senate bills also would rein in the tax break on profits from home sales. Married sellers owe no capital gains taxes on $500,000 of profit on the sale of a primary residence, while single taxpayers can take a $250,000 profit tax-free. The new rules would require sellers to live in a house for five of the previous eight years, rather than two of the past five years, to receive the tax exemption.

Rosemaria Bravo, a principal at MBAF in the Tax and Accounting department, said that could prove to be an issue.

“The elimination of applicability to a second home could have an impact on the Miami real estate market since there are many people that purchase second homes in the area,” she said.

Mike Pappas, CEO of The Keyes Co., a South Florida real estate company, said the REALTOR® and builder segments have been lobbying to keep the mortgage interest deductions in a reconciled version of the bill.

“Saying that — if it does pass as is — we believe there may be a short term affect but not long term,” he said. “The value of homeownership is far more powerful than only the interest rate deduction. With the raising of the deduction and knowing one-third of all homes are free and clear — the perception is far greater than the reality.”

There is one line of thinking that REALTORS® could be overstating the overall impact of a reduction to the mortgage interest deduction. According to the Post, the median price of a house sold in Florida from July through September was $240,000, according to the Florida Realtors, so relatively few buyers in the state would be affected by a $500,000 limit on mortgage interest.

“For most people, this tax package isn’t going to have an impact,” said University of Central Florida economist Sean Snaith. “The primary driver of why people buy homes is not to get a deduction on your mortgage interest.”