• Fortis Editors Note: we publish the following article with guarded optimism for the success of the new administration. But more importantly, we hope that he succeeds in all burdens that weigh so heavily on the Presidency.  As a measure of reality soon encompasses and removes the campaign bluster, we sincerely hope that the President elect carefully chooses the correct path for our people. The Real Estate sector would certainly want to see prosperity and gains in our dealings, but not at the expense of  people and institution’s less fortunate or simply in the wrong place and time.   The shoes of the Presidency are quite a burden to fill, and we wish the soon to be new “President” Trump success and triumph, for our sake and the worlds. God Bless America and Happy New Year!   DJM, MD  Fortis Investment Group  

December 01, 2016
By Kenneth R. Harney

Could the election of Donald Trump have unanticipated impacts on the federal tax code’s benefits, which favor  homeownership over renting?

To the extent that the House, Senate and White House soon will be under one party’s control, the answer may well be yes. Though housing issues got scant attention during the campaign, Trump’s tax reform plans, linked up with versions already proposed on Capitol Hill, could contain some jolts for many people.

Late in the campaign, Trump revised his earlier tax plans in ways that make it more compatible with House Republicans’ tax “blueprint” issued this past June. Trump would collapse the current seven tax brackets for individuals to just three: For married joint filers with incomes less than $75,000, the federal marginal tax rate would be 12 percent. For those with incomes of $75,000 but less than $225,000, the rate would be 25 percent. From $225,000 up, the rate for married joint filers would be 33 percent. Single-filer rates would have the same brackets but be based on incomes half the amounts for married joint filers. The capital gains rate would remain capped at 20 percent, and the controversial 3.8 percent “Obamacare” surtax on certain investment income would disappear.

Now it gets more intriguing: To simplify the tax system and wean more taxpayers from itemizing deductions on Schedule A of their returns, the Trump plan would boost the standard deduction for joint filers to $30,000 (up from the current $12,600) and raise it to $15,000 for single filers, instead of $6,300 at present. For very high income earners, there would be a limit on all itemized deductions of $200,000 for married joint filers and $100,000 for singles.

There’s no mention here of limits on mortgage interest deductions, so from strictly a homeowner or buyer perspective, nothing jumps out as objectionable. Simplicity is good. In fact, the original Trump tax plan exempted the mortgage interest and charitable deductions from the sorts of modest limitations contained in Hillary Clinton’s proposal.

But here’s a key question: With a substantially increased standard deduction of $15,000 to $30,000, how many homeowners will want to file for mortgage interest or property tax write-offs, as many do today. The chief economist of the National Association of Home Builders, Robert Dietz, estimated that the number of itemizers might drop from the current 25 percent of taxpayers to anywhere from just 5 percent to 10 percent.

Is that a problem? It depends on how one views the longtime tax code preferences for encouraging ownership of homes over renting. One analysis, provided by Evan M. Liddiard, senior federal tax policy representative for the National Association of Realtors, maintains that if the standard deduction is raised dramatically, “itemized deductions become less relevant,” and previously valuable and distinctive “tax incentives [for] homeownership evaporate even while taxes are not necessarily being reduced.” There’s less incentive to own rather than rent.

Dietz put it this way: When you decrease the attractiveness of a longtime subsidy devoted to encouraging purchases by lowering financing costs, “the economics would reduce the tax benefit for homeownership.” Such a change could “increase the after-tax cost of paying the mortgage,” he said.

Tax reformers see the issue starkly differently. Most comprehensive proposals that have been made in recent years, notably the landmark, bipartisan Simpson-Bowles National Commission on Fiscal Responsibility and Reform, call for wholesale elimination or sharp reductions of special interest carve-outs in the tax code.

But could limiting or ending homeownership tax preferences have the side effect of lowering home values and selling prices? Academic researchers suggest the answer is yes. A new paper from an economist at the Federal Reserve estimates that eliminating the mortgage interest deduction alone would cause the average household to lose
“10.9 percent of the value of the house, with homeowners losing 11.5 percent and homebuyers 8.5 percent.”

The Fed study did not address the type of tax plan contemplated by Trump or Capitol Hill reformers but appears to agree with the broad conclusion of earlier researchers: When you diminish the value of a subsidy benefit from a favored asset category, the value of that asset to potential buyers or owners is likely to drop.

None of this is happening yet. Months of committee hearings and debate — and lobbying — are guaranteed before any tax plan gets to the president’s desk. But it’s an indication of what’s on the line for real estate.

Kenneth R. Harney is a syndicated columnist.

Best Wishes for a Great Holiday Season

From all of us at Fortis

By Matt A.V. Chaban     New York Times Dec. 13, 2016

It has taken more than two years to resolve the bureaucratic quagmire of backlogged buildings at the New York City Landmarks Preservation Commission. Considering that some have been in limbo for four decades, it may have seemed like no time at all.

“This is really a mammoth undertaking,” Meenakshi Srinivasan, the chairwoman of the commission, said at a hearing on Tuesday at which the agency considered the fate of the final 13 of 95 properties on its backlog. “We can change the course of the commission’s practice to be better, more responsible, and timely. The process has been efficient, transparent and also incredibly rigorous, essentially starting from scratch and going back to all of these buildings.”

Ten buildings were designated as official landmarks on Tuesday, including the Bergdorf Goodman department store on Fifth Avenue. Of the remaining three, two did not win landmark protection, while a decision on the third was delayed. Preservationists said they wished more had been saved, but were grateful that in clearing its backlog the commission had granted landmark status to 27 properties over the past nine months, including the Pepsi-Cola sign on the Queens waterfront.

The commission’s votes Tuesday were a reminder of how the backlog grew and offered a window into the workings of the group as it grappled with the competing interests of property owners, preservationists, civic groups and politicians.

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“We’re pleased they’ve addressed the backlog; no one likes the backlog,” said Simeon Bankoff, executive director of the Historic Districts Council. “But there were a substantial number of significant buildings that were not protected, and not protected because of political calculations.”

The Bergdorf building, which was designed by Ely Jacques Kahn and completed in 1928, is an example of a property that had been caught in a tug of war. The store had opposed designation since it was first proposed in 1970, but support from the community, particularly Gale Brewer, the Manhattan borough president, helped the building ultimately win protection. The Immaculate Conception Church of the Blessed Mary, Convent, & Priests’ Residence in the Morrisania area of the Bronx was not designated, however, because of opposition from the parish and the local councilman. The council has the option to veto the commission’s decisions so the agency is reluctant to make decisions the council is likely to overturn.

One exception on Tuesday was the Loew’s 175th Street Theater. Councilman Ydanis Rodriguez and Representative Charles B. Rangel have supported the United Palace, a congregation and cultural center that now owns the theater and opposes designation. Nevertheless, the commission wanted to protect the property because the former movie palace is a rare example of the extravagant Indo-Persian architectural style.

Debates over the fates of buildings have intensified since Mayor Bill de Blasio took office two years ago and focused on the development or preservation of 200,000 units of affordable housing.

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The real estate industry and critics of preservation have seized on the chance to seek changes, including clearing the backlog of cases before the commission. Initially, the commission was going to clear the backlog in late 2014 without considering any of the properties, a move that drew an outcry and was quickly reversed.

Many owners oppose landmark status because of the burden of receiving approvals for renovations, and fears that changes could be rejected outright.

Among the structures that were designated landmarks on Tuesday were a YMCA building in Harlem where the writers Langston Hughes and Richard Wright once lived and Paul Robeson sang; the Excelsior Power Company building on Gold Street in the Financial District; churches in Flushing, Queens, and Bushwick, Brooklyn; one of the last wood-framed houses on the Upper East Side; and two Colonial-era houses on Staten Island.

The Edgar J. Kaufmann rooms, designed by Alvar Aalto, did not win protection in part because they are in a building at the United Nations with high security and limited public access. The panel continues to work with Consolidated Edison to preserve the IRT Powerhouse on 12th Avenue while allowing it to operate as a steam plant.

The commission has held two other hearings on backlogged properties since spring, at which such recognizable sites as the Vanderbilt Mausoleum on Staten Island gained protection.

Donald Trump and the other forces poised to shape the city’s economy in 2017. Some industries will fare better than others

By Greg David

Photo: Buck Ennis

Wall Street has been slow to replace jobs lost in the Great Recession. Trump’s presidency could give profits a boost.

In 2014 and 2015, New York City added a quarter million jobs, something that had never been done. The news isn’t as good for this year, and won’t be for 2017, but make no mistake: The city’s economy continues to prosper as sectors from tech to tourism to accounting to advertising—and especially health, education and the city government—continue to expand.

The great unknown is what President Donald Trump will mean for New York. His plan to cut taxes and add to infrastructure spending could provide a fiscal stimulus. His determination to roll back regulations on Wall Street could help this crucial industry that has been, at best, treading water. But he could also slash aid to the city and state over immigration reforms or set off a disruptive trade war that would upend all the assumptions.

Economists who specialize in the local economy agree that the city will end 2016 with an increase of about 80,000 jobs, a good performance by historical, if not recent, standards. Their forecasts for next year suggest a similar uptick.

The metro area’s $1.6 trillion gross domestic product, the largest in the country ahead of Los Angeles, and a 20% increase since 2013, according to the federal Bureau of Economic Analysis. The best news is that wages are rising faster here than they are in the rest of the country. Median household income in New York jumped 5.1% to $55,752 in 2015 and is now back to prerecession levels. Another jump is likely for this year and next, in part because of the big minimum-wage hike coming at the end of 2016.

But despite the recent Wall Street rally, a Trump presidency may not have much of an impact on the city’s fortunes, at least for the first half of the year.

Mark Zandi, the chief economist of Moody’s Inc.—and a solid Democrat—said the national economy is doing so well, and the Trump team is so unprepared, that it will be months before policies that affect economic growth will start to take shape. But as next year progresses, Trump’s priorities will start to matter, especially for the securities industry. The recent news on Wall Street has been pretty bad: The sector has not regained the jobs lost in the recession, profits have fallen for two consecutive years and the state comptroller has predicted bonuses will drop again next year. While it may not be as important as it was from 1980 to 2008, the financial market is still the city’s most important sector because of the outsize pay. Less than 5% of city jobs come from Wall Street, but the industry accounts for more than 20% of all income in the city and more than 20% of all state tax revenue. With financial stocks fueling the Trump rally, investors are betting that the next president will unshackle the industry from regulation, resulting in soaring profits and a boost in bonuses, furthering accelerating local gains.

But not all sectors will be winners in 2017. While the city expects to set another tourism record of 60 million visitors this year, the increase is relatively small. Without substantially more visitors, room rates will come down because so many new hotel rooms are coming on line. International visitors are also shopping less and retail employment in Manhattan is falling as a result.

Vacancy rates are increasing for the most expensive apartments as well as for retail and office space. There is clearly a glut of superluxury units, and retailers simply can’t pay what landlords are asking for, given the erosion of their businesses to online shopping. The strength of residential construction may depend on the resolution of the 421-a tax break controversy, and office rents will remain weak thanks to what looks to be a temporary glut of space. Taken together, the overall economy is likely to be a big plus for Mayor Bill de Blasio as he seeks reelection. If it falters, he can always blame President Trump.