What Has NAR Advocacy Done for Me Lately? Part 2

[00:04] Welcome to the Advocacy Scoop, the podcast that takes you inside the advocacy work of the National Association of REALTORS®, connecting 1.5 million members with their advocates in Washington for a front row seat to the fight for public policy that strengthens the ability of Americans to access property ownership.

[00:25] Hello, REALTORS®. Welcome to the Advocacy Scoop episode three of our brand new podcast where we take you inside NAR's advocacy operations. I'm Patrick Newton, Director of Advocacy Communications at NAR. Here with Shannon McGann, our Chief Advocacy Officer. Hello, Patrick. Great to be with you all again today, talking about all of the Advocacy 101 and wins and activities that we're involved with here in Washington, DC. We thank you for listening, and I hope that you can share this podcast with your friends. Yeah, that's right. Thank you for following along. In our first episode, we talked about Advocacy 101 and took you through how our advocacy operation is structured.

[01:06] In episode two, we tackled a question that we get asked by our members all the time, which is what have you done for me lately? We work another song into the podcast. But we talked about some of the big issues that we advocate for every year, the legislative fights that really define the real estate industry, you know, and if we weren't here waging the good fight, our members' businesses would be drastically different. You know, and this is part two of that conversation. We're going to discuss a few more issues today. So, Shannon, are you ready? It's going to be a taxing conversation. Oh, taxing. Yes, I'm always ready to talk tax.

[01:41] Talking about lots of taxes, the first issue I want to get into is one with a name that kind of scares a lot of people when they first hear it, and it actually confuses them, the 1031 like-kind exchange.

[01:54] Sometimes we tell this, say this to members of Congress, and they look at this with these glazed look on their eyes. Yes, so this is a very important tax provision that you all are surely aware of, but not everybody in Congress is.

[02:06] It is a feature, not a bug, to ensure that when you sell one investment property and purchase another that you don't spend a third of that in taxes, and that limits the ability to help with community development and growth.

[02:19] You just defer that tax, but it is always talked about in every budget cycle and tax bill as a potential way to eliminate that provision or to restrict it in order to pay for other things.

[02:31] It's been in President Biden's budgets. It's been in the Tax Cut and Jobs Act, but we were able to successfully have a permanent placement of protection for 1031 like-kind exchange.

[02:43] But as Patrick mentioned, just because you win something once doesn't mean that you don't have to fight that fight every single year. So, we are continuing that one this year along with many other key tax provisions to help with that community development and economic growth.

[02:57] And this was one of those issues that's all about education. Because you're right, like presidents wanna put out budgets that look fiscally responsible. So, they look for big buckets of money that they can offset.

[03:11] But then we sit down with a member of Congress and we say, well, if you get rid of 1031 like-kind exchange, it's gonna save this paltry sum of money, but it's actually gonna cost you more in economic development and growth.

[03:22] And once we educate people on this issue, they go, oh, it's like light bulb. And, especially when folks think, well, this is only going to benefit the super wealthy. The vast majority of properties that are exchanged through this provision are mom and pop investors, sole proprietors or past through businesses that are in need of those funds. And, if you do end up limiting it, it really doesn't raise that much in tax revenue. So, it's an important exchange.

[03:47] You don't avoid paying taxes, you end up paying them later down the road and you're reinvesting those funds. And, it's something that we have received very positive support for on both sides of the aisle. Yeah, we can probably do a whole episode on this and we probably will because I know how fired up everyone gets about it and it never goes away.

[04:04] This is like I said, one of those multi-year is never going to go away issues that we are the ones in Washington DC always leading this fight, busting all of these myths about 1031.

[04:15] Myth busting, left and right. Well, keeping the taxes thing going, that's just one of many tax fights that we fight. I love pulling quotes out of the Shannon McCann vault. Do you keep his vault? I don't know about this file that you have on me.

[04:27] I don't know. I mean, I just repeat things from smart people and then it makes me look smart. But, so I know you like to say that sometimes it is not what you get passed into law, it is what you prevent from getting passed into law that is the bigger win. And so that's like, I think no more relevant than when you talk about taxes. Oh, that is exactly right. It's very hard to put out a press release and say, hey, guess what tax provision wasn't included in that markup? See previous episode for definition of markup, by the way. But it is just as important through the legislative process to ensure that we are advocating for those things that need to be done and ensuring that those bad provisions are not passed.

[05:06] And so there are many that have come up in the last several years that impact especially sole proprietors and independent contractors and small businesses that we were able to prevent. But also it's important to note that there are many other tax provisions that are out there that may not be ready to be signed into law right now but have been introduced and that have been discussed and we are having these education sessions on them. We have many of these on our website flyin.realtor where you will find all of our latest, I'm clicking on it right now to make sure it loads and it's ready to go.

[05:41] Yep, all of our 2024 REALTOR® legislative priorities and talking points are listed there and you will see that there are several in the tax space. Not that tax policy is easy, it's about once every 30 years activity that ends up happening. That's why the Tax Cut and Jobs Act was the first big tax reform since the Reagan administration. But in advocacy, we're big believers in motion before progress and progress before success.

[06:07] And we have far more than motion, we have progress in many tax bills that have been introduced this Congress and last Congress that can be ready to rock and roll when the Tax Cut and Jobs Act expires next Congress.

[06:20] These are things like the bipartisan More Homes on the Market Act. That helps to incentivize more long-term property owners to sell their homes by increasing the amount of capital gains that they can exclude on the sale.

[06:33] Again, bipartisan support, Congressman Jimmy Panetta of California and Mike Kelly of Pennsylvania. The Neighborhood Homes Investment Act, which we have long supported, that's received. Senate and House and bipartisan support for many years and we're increasing the number of co-sponsors there. Things like the YIMB, the Yes in My Backyard, which encourages communities to build more affordable housing. These are all important pieces of legislation that are making progress right now.

[06:57] Included in that also is SALT, which is also one of those you see it pop up on your Google alert, like what's the deal with SALT? We'll probably devote an whole episode to that one as well.

[07:09] State and local tax deduction. This is an acronym-free zone. Something that was limited in the Tax Cut and Jobs Act and impacts families across the country, not just in those high tax states. I mean, there are states that you might not expect that have higher state taxes.

[07:22] And, if you're not able to deduct all of them, we had a elegant solution with the marriage penalty that essentially says, instead of it being per household, that it's per person, but you don't have the marriage penalty.

[07:33] So, if you have two people filing, it doubles that deduction. We have had progress there where it actually got the attention of House leadership and a vote on the floor and they're still not ready to go and make that big change, and I think a lot of that is in anticipation of the Tax Cut and Jobs Act expiring next year along with that provision, but we've had very positive conversations and our state associations have been very active in this as well. And talking about taxes taxes, because our next topic here is affordable housing, which basically every solution to affordable housing and supply runs through the tax code.

[08:08] You've already mentioned some of those bills already, so just an extension of that conversation. The Tax Cuts and Jobs Act, which were the tax reform when President Trump was in office and was signed into law, lasted eight years. And so, it's expiring, and this is going to be a big one big fight next year and how are we preparing for that because, yes, it's it's like end of 2025 when it expires but we're already like all over this.

[08:35] Oh I'm going to get way into alliteration on this one so we're we have been consistently focused on the three a's of housing accessibility, availability, and affordability and all of those go right into our inventory gap there are not enough homes out there for people to buy.

[08:53] The demand is high, the supply is low. And, Patrick, you are absolutely right. A lot of times people think that tax policy means what's impacting your business or what's impacting your personal savings account, but that also can be a way to incentivize that type of growth and productivity that's happening throughout the country. In fact, it's our own research team, led by Dr. Lawrence Yun, who issued a study that we have an underbuilding gap of at least five and a half million housing units over the last 20 years. That translates into more than $4 trillion in underinvestment.

[09:28] So many of those tax bills that I mentioned of the existing inventory being able to sell a home to an owner-occupied buyer, and not having to face the same tax consequences in order to keep that home on the the market.Those are benefits there, too. But, we also look at things like the Choice and Affordable Housing Act that creates incentives for housing providers to participate in HUD programs like the Housing Choice Voucher program.

[09:52] That's another one that has bipartisan and bicameral support. And then, we also are looking at things like the Credit Access and Inclusion Act,  how do you help more people afford homes by ensuring that if they have a limited credit history that other components can be taken into consideration to help with especially those first time home buyers that supported by Senators Tim Scott and Joe Manchin.

[10:16] So, there are many other provisions out there. We're working on these day in and day out. It's probably what we get really fired up on inventory. But the other problem we have is interest rates and inflation, so the three I's, and insurance if you want to look at that one too. So, there are many issues there and we tackle all of them in our legislative talking points at flyin.realtor. We know the website has tons of information.

[10:39] The most transparent organization, everything that we do shows up on our website that doesn't always make it easy to navigate. So, just go to flyin.realtor. Well, and you know, fly-in is sort of DC lingo, right? So, that's what we like when when you work on the Hill, as Shannon and I both have, you know, it's fly-in season, it's usually spring, and that's when trade groups bring their, their folks to DC, and they hit the halls of Congress, and they come and they meet with their legislators, and we do the same thing. In May, we have our REALTOR® legislative meetings, 10,000 REALTORS® come to town, that's called a fly-in, you know, and so we created a flyin.realtor, so congressional staff can always go to that website and know what our priorities are, but also you, our members, can take a look at this website as well, it's public, and know all the things we're fighting for all the time because, you know, sometimes it takes multiple congresses to get legislation passed and it is a multi-year educational effort and there's no big victory day where we're going to plant the flag and say, we did it, let's all go home or to happy hour. Well, before we close out, I think we have time to tackle one more issue here, the Department of Labor Rule on Independent Contractor Status.

[11:56] So, take us through this one, Shannon, because when our members see the Pro Act, they get a little frightened. We are con the Pro Act, right?That is correct, that is correct.

[12:07] So, the Pro Act is not something that we're expecting to make it through Congress anytime soon, but one thing we are concerned about is that the Department of Labor New Year, new rule issued an independent contractor rule that determines how workers are classified under the Fair Labor Standards Act.

[12:26] They had previously issued a rule back in, I think, 2021 that allowed for this kind of multi-factor test to determine whether workers should be classified as independent contractors or employees.

[12:39] This new rule is a bit more gray in that area, and our members are concerned, rightfully so, that states may misinterpret it or there may be confusion about whether or not you are an independent contractor or a worker.

[12:52] This is especially important in the real estate industry because of the vast majority, I think nine out of ten of our real term managers are independent contractors and small business owners, folks who are entrepreneurial, who like the flexibility and choose to be independent contractors, and it has worked very well for their careers, it has worked well for their families, and we think that that's something that Congress should recognize.

[13:16] So, we have been talking to members of Congress about this for many years, understanding that there could be some confusion with this, and actually a bill was introduced this Congress called the Direct Seller and Real Estate Harmonization Act.

[13:29] So, this is actual legislation to amend this law to clarify that the definition of an employee, as it relates to direct sellers and real estate agents, are protected. So we're continuing our advocacy efforts on the Hill, and we have also had meetings with the Department of Labor. We have sent strongly worded letters. They are all available on our website, The Washington Report. And we have been very pleased with the communication coming from the Department of Labor to attempt to clarify this.

[13:55] And they are indicating that they're not trying to make any of our members change their independent contractor status, that they think the language is a lot clearer than we do. But we're just concerned that this is something that states could misinterpret, or that could lead to another opening in the future for congressional action.

[14:09] So, there's more efforts on the way, on the legal front. There's efforts in the Senate to do something called the Congressional Review Act, where if rulemaking goes through that Congress is not a fan of, that they have the ability to also vote and determine that this could be overturned, or they have to go back to the drawing board. So, these are all on the table, and we are continuing to have those conversations with the administration and with Congress.

[14:33] So biggest takeaway, you know, Earth to Washington, more than 90% of REALTORS® are independent contractors and they choose that classification. So, you know, this is a big deal for us.

[14:44] And I love how you phrase this because, you know, it's all about education. And, this is another perfect example of one of those issues that's not going to go away. There's always going to be someone advocating to the expansion of independent contractor status for workers who do not understand its application in the field of real estate.

[15:02] But it's one of those things that we're fighting on multiple fronts. So, you mentioned legal, you know, you've got legislation before Congress, the PRO Act. You have states that are looking into this to, you know, on a state level. And we have executive branch, Department of Labor rules that are being written. So, we're like, we're monitoring it on every front continuously, and anytime it pops its head up, we're there to educate. So, you're exactly right. And when it pops its head up, that means that we've already been out there talking to the relevant policymakers and that they are aware of these issues. And, what's been especially helpful are folks back in California and around the country who have tackled these issues at the state level and understand how best to educate and communicate them. So, we give a big shout out to our California Association of REALTORS® who flew into town and had some of those very important meetings right after that rule came out. All right, so we're getting to the end of the episode now Shannon, you know what that means means. It's closing time.

[15:57] Closing time. You don't have to go home, but you can't stay here. Exactly, and an opportunity to me to get in my real estate pun every episode.  Every episode. Anyway, so question today to ask you for closing time, and it's one we get a lot here, is what's the number one thing that you wish policymakers understood about NAR?

[16:20] Oh gosh, there are many, many things. That is why we are so gainfully employed to share with policymakers everything that we can that impacts our 1.5 million members.

[16:31] But the number one thing that we communicate at the top of meetings and any engagement that we have with staff, with members of Congress, with the administration is the nature of our membership.

[16:42] That we are 1.5 million individual members. These are human beings who are working within their communities who have these dedicated jobs. A vast majority are women.

[16:54] I think our research team, they do their profiles of our membership, and the typical member is a 60-something year old woman who has about a decade of experience and making under $60,000 a year.

[17:07] To put a face and a person attached to the policies that we are promoting. So, when we do something like advocate for independent contractor status or advocate for 1031 like-kind exchange that we're explaining the why and the who of who we're fighting for.

[17:27] So many folks get their information from TV, sometimes reality TV, sometimes just from the news and what often makes for great entertainment isn't always the reality of what we're facing on a political field or, when it comes to public policy.

[17:44] So, I think that's why we talk about this all the time, but I can't emphasize it enough. Our FPC program, the federal political coordinators, where every single member of Congress has that direct contact, who works in their community, who understands the issues that their neighbors are facing, that their clients are facing, and they can have those real heart-to-heart conversations instead of just being a page of talking points.

[18:08] Those matter, those are helpful, they're all available on flyin.realtor. Please visit that, they're updated regularly, but it's just as important to have those relationships and to understand the people we're representing.

[18:22] Yeah, and I love how you put that. And, sometimes I hear people say, the phrase real estate industry and we always pause when we say that because we don't, NAR doesn't represent an industry.

[18:33] We represent one and a half million individuals, not an industry really. So, I love the way you put that. When you also hear that people mention that, oh, they're a special interest group. Real estate is not a special interest. It is a general interest. This is nearly a fifth of the economy, and this is the livelihood of our 1.5 million members.

[18:56] So, there are many issues that we can bring to the table and great information and just those solid relationships. And, I think that separates us from all the other organizations here in DC.

[19:07] So, that's the scoop. Thank you to everyone listening to this podcast. Please be sure to subscribe and share wherever you get your podcast. and meet us right back here for more advocacy scoop next time.

REALTORS® are members of the National Association of REALTORS®.