Brad Klatt, a partner at the real estate development firm, Canoe Brook, acknowledges with the tax reform, Americans are still only three feet from the gate. However, he corrected the NY Post headline which read renters were winners under the tax reform. “I don’t think that’s true. I think the answer is rental owners are the winners in this new tax code,” said Klatt.

For filing federal tax returns, by increasing the standard deductions, capping the combined state, local and property tax deductions to $10,000, and limiting mortgage interest deductions to mortgages up to $750,000, the law reduces incentives for home ownership.

Klatt reviewed underwriting scenarios showing post-tax reform left people with less after-tax cashflow. With reduced buying power, their aspirations for home ownership were also diminished.

Klatt, along with Richard Shapiro, director of EisnerAmper; Mike Slattery, SVP research, Real Estate Board of New York; Jimmy Hinton, managing director of research, HFF; Jonathan Miller, CEO, Miller Samuel Inc.; and Steve DeNardo, CEO RiverOak Investment Corp., participated in a panel moderated by James Nelson, Vice Chairman at Cushman Wakefield.

The discussion, “Tax Reform’s Impact on the Real Estate Market,” was co-hosted by the Fordham Real Estate Institute and the Real Estate Services Alliance.

“We all witnessed a great slow down in the first half of the year after the election,” said Nelson. “One thing I’ve seen throughout my career is when there’s uncertainty investors tend to stay on the sidelines and take this wait and see approach.”

The number of sales throughout the US last year from 2016 to 2017 was down 12% in dollar volume and 3% in number of sales. New York City was much more severe. The decline was 39% on dollar volume and 17% on the number of sales, according to Nelson.

Miller said that following the tax law, “Every buyer in America is angling and overstating the impact of their situation in order to beat down the seller to get a better price.”He noted people ready to buy last summer or fall want to wait a year or two to see how things shake out.

The expectation was overnight there would be a price correction. However, it is a long drawn out process of buyers and sellers reaching some sort of agreement on what values are. Plus, there are often perception problems of deductions taken in the past and losses incurred under the reform. “These issues need to be sorted out,” said Miller, “So expect lower sale volume going forward.”

Under the tax law, “The conclusion is the commercial real estate sector has done rather well and the residential sector has taken a bit of a hit,” said Slattery referring to the change in itemized deductions and reduction of SALT deductions.

“For those people in NY, CA, IL, the high tax states who were going to lose their itemized deduction—thank you very much of paying for the corporate tax deduction,” said Slattery. “There were not a lot of negotiations. There was not the kind of dialogue you would have seen if it had been a more traditional approach tax reform. It was really six men in a room making a decision.”

Bill Rudin, recently appointed chair of REBNY, with the Association for a Better New York formed an organization called Americans Against Double Taxation to push back on SALT. It had the support of local representatives from New York, the retail industry and the National Association of Realtors.

Regarding the tax reform, Slattery said, “The sense from our membership has been yes, positive on the commercial side, less on the residential side.”

The tax plan lowers corporate taxes and creates incentives for the repatriation of capital.

Slattery compared the tax reform to the American Recovery and Reinvestment Act of 2009, when the economy was in a crisis. With President Barack Obama entering his first term, Congress passed legislation that created $800 billion in deficit financing to stimulate the economy. The tax reform is a package will create a deficit of $1.5 trillion.

“The tax law will have a positive effect,” said DeNardo, “Biggest beneficiaries are going to be high net worth people. They will put more wealth in their pockets and potentially if I can tap into one-tenth of 1% of that wealth, I have been pretty successful.”