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Realtors say removing or limiting interest deductions would hurt housing Some local Realtors are worried that attempts in Salem to limit mortgage and property deductions could hurt housing affordability. [Mail Tribune / Denise Baratta] Thursday Mar 9, 2017 at 5:49 PM Mar 9, 2017 at 5:49 PM Greg Stiles Mail Tribune @GregMTBusiness Local real estate agents fear that two bills under consideration by the Oregon Legislature would undermine residential housing markets if they pass. House panels have reviewed bills aimed at reducing or erasing deductions some taxpayers claim from mortgage interest and property taxes. Lawmakers on Thursday heard testimony on House Bill 2006, which would cap the state mortgage interest deduction at $15,000 and eliminate it altogether for homeowners earning over $100,000 a year or $200,000 if filing jointly. Mortgages for second homes and vacation rentals would be ineligible for the deduction. Rules for the federal mortgage interest deduction would not change. Earlier this week, a panel examined House Bill 2771, which would revoke property tax deductions for Oregon homeowners earning $125,000 or more, or $250,000 or more when filing jointly. Others would be able to deduct only a percentage of their property taxes, depending on how much they earn above $50,000, or $100,000 filing jointly. The revenue generated through the legislation would be directed into three state programs that help low income people buy homes and support the building of affordable housing units. But the bills could have the opposite effect by adding to the cost of home ownership, said Rick Harris, a past president of the Oregon Association of Realtors and owner of Coldwell Banker Pro West Real Estate in Ashland. "It would push rent expectations higher, and we're already pushing rents higher," Harris said. "It wouldn't affect the purchase cost (of income property), but would be a cost to the renter." HB 2006 would drive up the cost of housing in general, he said. "It would break a 105-year-old promise included in the original U.S. income tax code that included mortgage interest deduction," Harris said. With housing stock at about a third of the usual supply, he said, there are fewer entry-level houses available. "When you remove the deduction, you decrease the ability for someone to move up and create an opening on the ladder. Frankly, their heart is in the right place, but it's the wrong idea." Lincoln County Commissioner Bill Hall told the House Human Services and Housing Committee eliminating deductions used for vacation homes on the Oregon Coast would allow the state to put more money into affordable housing. He said the 1 percent rental vacancy rate in his county has created difficulty for employers to recruit and retain employees. "The coast is seeing serious impacts of a large number of homes that are not primary residences," Hall testified. "Some are in the vacation rental market, others are private retreats." While Hall pointed to part-time residents as the reason for failing tax measures, Rep. Duane Stark, R-Grants Pass, said providing disincentives for vacation home buyers will not solve housing problems or revenue shortfalls. "We're producing 7,000 units per year less than we need," Stark said. "Rather than looking at that (the Legislature) is making the homeowners and landlords the solution." The added tax burden associated with HB 2771 would keep some potential house buyers on the sideline, said Scott Lewis, a Rogue Valley Association of Realtors board member and former Southern Oregon Multiple Listing Service board president. "I would wager if there was a greater tax burden, or fewer tax benefits, it would eliminate a percentage of people who would like to be homeowners but are right on the edge," Lewis said. "This might bump them out of taking that step." "Home ownership is the biggest key for personal wealth in the U.S.," Lewis said. "There is a clear relationship between home ownership and net equity. The comparison in net worth for people who own their homes and people who are renters is a vast thing." — Reach reporter Greg Stiles at 541-776-4463 or [email protected]. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at www.facebook.com/greg.stiles.31.