Real Estate Reporter

The tax bill cometh

San Francisco will test the impact of major changes to housing tax law
House Speaker Paul Ryan capped his 2017 by passing a long-sought tax reform bill that will have a big impact on high-tax areas like San Francisco. Photo: Gage Skidmore


Conservatives finally got their long-sought tax bill at the end of December. To help pay for dramatic decreases in taxes for top earners, authors of the congressional tax bill are bringing in revenue from elsewhere. Of particular interest to San Franciscans will be the changes in deductibility of property taxes, the lowered cap on mortgage deductions, and new restrictions on home equity loans.

Some of the news is better than had been expected. During the hurried negotiations phase of the bill, there was talk of completely doing away with the mortgage deduction (at the most radical proposal) and more common talk from House Republicans of lowering the amount of a loan for which the mortgage interest deduction can be granted from $1 million to $500,000. The Senate had other ideas, and after the House and the Senate reconciled their competing tax bills, the result was a standard compromise: The mortgage interest deduction is now limited to loans of $750,000 (or, for loans greater than that amount, then the deduction can be applied to that first $750,000).

You can find a pundit who will argue any side regarding the expected impact on the housing market of the tax change. Some say that it will put downward pressure on prices (good for buyers, bad for sellers and tax collectors); others are saying that the places where it applies — high-cost home markets in housing-crisis California, for one — are unlikely to feel much impact, because the shortage of housing and the still-booming economy are going to keep things go-going.

CNN Money cited ATTOM Data Solutions’s estimate that this year 58 percent of home loans in San Francisco were greater than $750,000.


Another change in the bill could be felt by more people. The bill targets high-tax states by capping deductions for property and state income taxes — combined, not each — at $10,000.

Home equity loans are also being reined in. You will still get deductions for interest on home equity loans up to $100,000, but only for loans covering home improvements. The deduction can’t be used for home equity loans used for other purposes, such as paying off debts or buying a car.


So yes, people will be spending more time talking to their tax attorneys and consultants this year.


Kudos to the folks at Coldwell Banker Residential Brokerage offices in Northern California, which raised more than $100,000 in 2017 for a number of charities, including Dreampower Horsemanship and the Lucile Packard Children’s Hospital Stanford. Nancy Robinson, regional vice president for the brokerage, praised the staff and agents who raised the funds, and added “We look forward to growing this number annually.”


Writing in the San Francisco Business Times, Roland Li notes: “A proposal to remove commercial buildings from Prop. 13 protections could raise California’s annual property tax revenue by an estimated $11 billion. The ‘split roll’ ballot measure, filed . . . for the November 2018 election, would be the state’s biggest property tax change in decades. If passed, it would increase property taxes for hundreds of thousands of properties around the state.”


The tech boom is ongoing and it is spreading, which has implications for San Francisco and the Bay Area. Real Estate services firm Jones Lang LaSalle’s 2017 US Tech Office Trends report warns that with “unemployment at historic lows, it’s going to be much harder for tech companies … to grow the way they have over the previous 10 years,” so further rent increases for office space could slow.

Furthermore, markets outside of the Bay Area (Atlanta and Pittsburgh, for example) are becoming tech hubs themselves, so San Francisco won’t be the only big city bursting at the seams with tech companies and people riding skateboards to work.


Remember that tony Presidio Terrace street that was bought at auction after homeowners failed to pay their tax bill for 30 years? People were shocked to hear that the street was purchased (the shock generated by their not knowing that it was a private street, not a public one). Near the end of 2017, the Board of Supervisors voted to reverse the sale.

They should also set up a Google Calendar automatic reminder to pay their taxes in the future. The calendar, at least, is free.

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