President Reagan's tax proposal would be very damaging to the real estate business in general and to rental housing in particular, spokesmen for industry groups said yesterday.
Although most agreed that the president's plan is a bit more palatable than the one outlined by the Treasury Department last year, homebuilders, apartment owners, commercial developers and real estate sales industry representatives all indicated that they will press Congress for significant changes.
If enacted as is, the Reagan plan would be "devastating to our industry," said Scott L. Slesinger of the National Apartment Association.
Kent Colton of the National Association of Home Builders called some aspects of the proposal "positive" but noted that other features, such as elimination of local property-tax deductions, would increase the cost of home ownership.
Steven Wechsler of the National Realty Committee, which represents large commercial developers, said, "Our basic sense is that it will result in significant increases in the tax burden on real estate." He and others said they were particularly concerned that investors would turn to other areas whose tax treatment is more favorable.
Colton and others emphasized, though, that they are willing to negotiate with the administration and Congress in search of something with which they can live.
The National Association of Realtors "will not blindly say no" to tax reform, said Clark E. Wallace, its president-elect.
Treasury officials admitted that their plan, even though it is intended to neutralize tax rates on different kinds of investments, would be tougher on real estate than on some other investments. Effective tax rates on income from most assets would be about 17 percent or 18 percent; the rate for real estate would be 24 percent, they said.
"We just weren't able to design a system without penalizing other assets or overly helping real estate," said an official, who asked that his name not be used.
Asked what the plan would do for low-income housing, the official said he imagined the low-income housing industry would be "gleeful" about the removal of a provision that would have lowered interest deductions by adjusting them for inflation. The industry also should like dropping the restrictions on large partnerships and the new depreciation system, he said, although he admitted that housing groups might not agree about depreciation.
Among the provisions the industry finds most objectionable, in addition to elimination of state and local tax deductions, are: The elimination of tax-exempt industrial development and mortgage revenue bonds. Colton estimated that half of all multifamily rental housing currently being built depends on tax-exempt financing. Limiting investors' deductible losses to the amount of money the investor has "at risk." Wechsler said it is not clear how many investors would be willing to increase their exposure to risk in order to keep their benefits, but there plainly will be cases where "you'll just find people walking away from deals." Elimination of capital gains treatment for real estate and other depreciable property.