GOP's win revives bill on protecting property value

NATION'S HOUSING

November 20, 1994|By Kenneth R. Harney

Washington -- To get a sense of what tack the new Republican majority in Congress plans to take on real estate and housing issues, turn to the Congressional Record of Aug. 19.

On that day, Sen. Phil Gramm, R-Texas, introduced the Private Property Rights Restoration Act (S. 2410). The bill's midsummer arrival drew little notice or coverage. After all, it was just another piece of conservative legislation destined to go nowhere. Even if it miraculously got on the agenda and passed the Senate, it would never see the light of day in the House, where Democratic environmental activists would kill it in committee.

The same activists have managed for years to block GOP efforts to rein in the regulatory reach of the Environmental Protection Agency on wetlands, endangered species and other land use matters. So the outlook for Gramm's bill was pretty clear: DOA.

That was August. Today, Gramm's bill -- or language similar to it -- is a plank in the Republicans' Contract with America. It's part of a package that the new committee chairmen on both sides of Capitol Hill have pledged to bring to the floor and pass in the first 100 days of the 1995 session.

What would the property rights act do? In Gramm's words, it would "restore the constitutional mandate that just compensation be paid when government action reduces private property value." Specifically it would allow owners of any real estate who can demonstrate that federal government regulatory action has diminished its market value by 25 percent, or $10,000, to sue for compensation in the U.S. Court of Claims.

If a property owner's claim is successful, he or she would be entitled to collect either the full market value of the property -- and deed the real estate over to the government -- or get cash for the amount of the devaluation. The source for the cash awards, plus legal fees, would be the budget of the agency responsible for the regulatory action that caused the value to fall.

Since federal regulatory actions on land use -- especially wetlands and endangered species -- routinely cause substantial decreases in property values, Gramm's bill could trigger an avalanche of suits, say environmental groups. And by forcing individual agencies to pay for claims directly out of their own budgets -- horror of horrors -- the agencies themselves would be far more cautious in their regulatory actions affecting privately owned real estate.

"That's the whole point!" shouts Margaret Ann Reigle, chairman of the Fairness to Land Owners Committee, a national grass-roots property rights organization based in Cambridge, Md.

With the Republican sweep of Congress, says Reigle, "we're finally going to get a fair hearing. We've been telling Congress for years that federal agencies are stealing private property when they come in and tell owners: 'That's now a wetland and you can't build a house on it,' or 'we found a spotted owl in your tree and now you can't do anything with your land.'"

Property rights legislation is just one piece of what Capitol Hill's newly ascendant Republicans plan to do on real estate and housing. Here's a sampling of the rest of the agenda, based on post-election discussions with committee staff members.

* Home loans:

If you live in a high-cost area and were hoping for larger mortgage amounts on low-down-payment FHA-insured loans, forget it.

The House passed legislation increasing the FHA ceiling to $172,675 earlier this year, up from $151,725, but the Senate never approved its own version of the bill. The word on mortgage limits from the GOP: Federal Housing Administration mortgage insurance should be targeted at lower and moderate-income and first-time homebuyers, not people who can afford payments on a $172,675 mortgage. FHA shouldn't cream away borrowers whom private sector lenders can -- and should -- serve adequately on their own.

* Fair lending legislation:

Forget it. A House subcommittee headed by Rep. Joseph P. Kennedy II, D-Mass., was the hotbed that generated a slew of reform bills on consumer issues from property insurance redlining to "high-cost mortgage" scams aimed at inner city homeowners. Kennedy won't be chairing that -- or any other -- subcommittee for the indefinite future.

* Capital gains tax cut for real estate:

The Contract with America promises some form of capital gains relief, but keep a sharp eye on the details. For starters, lower capital-gains taxes will increase pressures for raising revenues elsewhere -- including some form of limitation on either mortgage interest or state and local property tax deductibility. Bear in mind that the putative Senate Finance Committee chairman for 1995 will be none other than Sen. Bob Packwood, R-Ore. Remember what Congress did to real estate the last time he chaired that committee? It's known as the Tax Reform Act of 1986, which in real estate terms was the equivalent of having brain surgery performed by a swordsman.

Stay tuned.

Kenneth R. Harney is a syndicated columnist. Send letters care of the Washington Post Writers Group, 1150 15th St. N.W., Washington, D.C. 20071.

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