The good-news, bad-news syndrome is at work on Capitol Hill again for American homeowners.
The good news has to do with taxes -- particulary a reversal of the federal government's recent tough stance on personal use of vacation homes, deductions for "office in the home," and rentals of property to relatives.
The bad news has to do with mortgage assumptions -- the right of home sellers to transfer their highly attractive, low-interest rate loans to new buyers. With half or more of existing home sales in many markets now dependant on assumptions, any federal move to curtail the technique nationwide would be a serious blow to residential real estate. A key federal official is lobbying Congress to do precisely that, immediately.
But first the good news. For the past year, the Internal Revenue Service had been embroiled in a controversy with three sets of homeowners: people who have vacation property that they rent out periodically; people who maintain part-time business offices in their homes for which they tax tax deductions; and people who rent housing of any type to relatives.
The IRS isn't certain how many millions of Americans fit into one or more of these categories. But it's heard from thousands of them by letter, telegram and irate phone calls since last August when the Carter administration unveiled proposed federal regulations that would:
Severly penalize anyone renting a regular home or vacation property to a relative. Under the rules, use of a home by a relative was the equivalent of personal use by the owner, even if the rental amount charged was the same as that charged to strangers, and even if the owner was thousands of miles away at the time. The owner could thereby lose a portion of the normal tax deductions available under federal law for investment property -- a loss that would run into the $5,500 to $10,000-a-year range for many small scale property owners.
Deny the traditional tax deductions for "offices in the home" for anyone who didn't use the house as his or her "principal" place of business. Tens of thousands of taxpayers with part-time businesses or trades -- ranging from salespeople to writers to real estate investors -- faced significant financial loss because of the regulations.
Sharply restrict vacation-propery owners' repair and maintenance visits to their units. The rules would have required a full day of physical labor on the house -- documented for audit purposes -- for an owner of a rental beach house, ski condo or lake cabin to escape tax treatment of the visit as "personal" (pleasurable) use. Since federal law already resitricted owners to no more than 15 days per year of personal use of their rental vacation property (or 10 percent of the total rental days), the regulations were viewed as extreme by many taxpayers.
The Treasury Department under Carter adamantly refused to back down from the proposals. The new Reagan team at Treasury included the proposals in its list of "high-priority review" regulations, but refused to comment about them for months.
That is, until late last week. In a letter to Sen. William L. Armstrong (R-Colo.) -- chief advisor of pending legislation that would nullify the Carter regulations -- the Treasury redefined the federal government's position.
Assistant Secretary for Tax Policy John E. Chapoton said the Reagan administration will propose the new regualtions shortly that permit home-office deductions for seconday businesses or trades.
Treasury will also support Armstrong's legislation, which is likely to come before Congress within the next 90 days, removing the current tax penalties on deductions for anyone renting property to a mother, father, brother, sister or other close relative at fair-market rents.
That's good news. The bad news comes from Richard T. Pratt, chairman of the powerful Federal Home Loan Bank Board, regulator of a large percentage of the nation's thrift institutions.
Pratt asked Congress last week to pass legislation overriding all state laws that limit lenders' rights to black home mortgage assumptions. That would mean that home buyers and sellers in states like California, Georgia, Colorado, Arizona and others -- where legislatures have restrained lenders from automatically increasing rates on assumed mortgages to market rate -- would have their most important real estate financing tool removed from them.
Congress overrode states' usury laws last year under pressure from the banking lobbies. The bank board now plans to submit legislation for a congressional override of all state "pro-assumption" mortgage-finance laws shortly.
Successful passage of the bank board's bill could directly affect housing values accross the country. Houses with assumable financing sell for a premium price in 1981's tight market. Houses without assumable financing sell at a discount -- or simply sit unsold.