Get Real Estate Podcast

Upcoming Legislative Session, COVID-19 Relief, Lobbying, Property Taxes with Bill Castelli

January 18, 2021 Maryland REALTORS® Episode 2
Get Real Estate Podcast
Upcoming Legislative Session, COVID-19 Relief, Lobbying, Property Taxes with Bill Castelli
Show Notes Transcript

In this episode, host Chuck Kasky, CEO of Maryland REALTORS®,  sits down with Senior Vice President of Government Affairs, Bill Castelli to discuss the many changes taking effect in the upcoming legislative session due to the pandemic, the process of lobbying, COVID-19 eviction moratoriums and rental assistance, property taxes and more.

Speaker 1:

A widow whose husband died without a will got bad legal advice from an attorney. The error happened because the attorney failed to note changes to inheritance law from the previous year's legislative session. The error arose from want of diligent watchfulness in respect to legislative changes. He did not remember that it might be necessary to look at the statutes from the year before in a decision by judge Gideon, Tucker comes to quote that no one's life, Liberty, or property are safe while the legislature is in session. We take that to mean that we have to use our due diligence when observing the legislative session and participating in the process. Hello, I'm Chuck Caskey, Marilyn realtors, and this is get real estate, the Maryland realtors podcast with me today, Maryland realtors, senior vice president for government affairs. Bill Castelli. Welcome bill. Thank you. Bill has been our lobbyist for 25 years now, and I can't tell you how great it is to have someone with Bill's competence and credibility as representing us in Annapolis. So, bill, what do you expect from the 2021 session given how different everything is going to be given COVID protocols, et cetera. And then a little bit later, we'll talk about substantively what we think the general assembly might be dealing with. So let's start with, first of all, there's new leadership this year in the Senate and the house relatively speaking, and then a lot of changes in terms of the protocols, as far as how business is actually going to be conducted. So can you take us through some of those things and I'll start off by saying in those 25 years, I've lobbied on behalf of realtors, agents, and brokers. This year is going to be, I feel safe to say more different than any session I've lobbied in, in there in the past. And they're all a little bit different, you know, different people change committee leadership changes, but this is going to be an entirely new way that people groups, legislators interact the public with the, with the legislators, the legislators with themselves, where they're meeting, everything's going to be new and add on top of that, as you just said, we have relatively new leadership, the speaker of the house, Adrian Jones, the Senate president, bill Ferguson. This is their second year in their respective positions. So I think they've done a tremendous job. I mean, if you think about it the first year, they both followed very long tenured leaders in Maryland who are legends really. And their first year, their session ends not quite halfway through a little over halfway through first time that's happened since the civil war and these, both of these relatively new leaders had to deal with all that adversity and really in the end passing the budget and all the bills that had to pass before that abrupt end to the session. So I think this year, you know, it was kind of viewed as if we got through COVID. This might be their first quote, unquote, normal year to kind of lead, but that's going to be very different for them this year, too. In fact, it's in many respects, more different than what they experienced last year. Right? Right. So you mentioned the word lobbyist for people who may not be as familiar with government affairs as we are. Why do they call people like you lobbyists? I have always been told, and I don't know that this is true, but that, uh, the term lobbyists derives from one of the old hotels down in Washington, DC. And at that time, this was, I think in the 18 hundreds, you had advocates for businesses, different groups, organizations like ours, who would advocate on behalf of a position on a particular bill. And they always hung out in the lobbies where the legislators were staying and would grab the legislators as they were going through to tell them, Hey, you know, I hope you can support us on this bill or oppose that bill, but it's, you know, lobbyists are just advocates. That's all, you know, we represent, I represent the realtors. That's the only group I represent. There are many multi-client lobbyists down in Annapolis who represent all kinds of industries and non-profits churches, animals. I mean, it's, you have an interest. I, I can almost promise you, they are represented in some way before either the federal government or state government somewhere. I've heard that story too. That's kind of gone out of favor. We pretty much prefer referring to you as our government affairs specialist or rather terms, but that's where we've always been. We otherwise understood that lobbyists came from that old story. So what is the session actually going to look like physically? So in terms of your lobbying, you're probably not going to be in the lobby. So how are we going to get our positions on legislation known to the delegates and senators and you're right there is going to be no, no actual lobbying this year. We are not allowed in public buildings. There really aren't going to be any members of the public public allowed in public buildings that might change a little bit in the Senate. The Senate has a protocol protocol that they'd set forth. So it looks like at the start of session, there will likely be very limited public access II. If you have to have a meeting with a Senator there, their staff is going to have to meet you in the street, escort you into the building and up to the office so that you are literally going from the street to the office and back out. So you were literally not going to be able to spend any time in the lobby at all, waiting for anybody. And I think what this is going to look like, and in some respects, it's going to be more transparent because there are going to be more people we're going to be able to participate and view hearings than they, than they happen because it's all going to be virtual. Uh, and in fact, signing up for testimony is going to be easier and more transparent than it than it has ever been. It used to be, I'll give you an example in a typical day, you know, we might have two or three different committees having hearings on bills that we care about. And you know, some of the bills, we care a little bit about some of the bills we care a lot about, but we've for those bills that we care a lot about that we're going to testify. We might have a member who's going to come down and testify in support or an opposition to that bill. We've got to get down there early. We've got to actually go to the committee room, sign up, download all of our testimony. So there is this physical process you go through, that'd be brought down. I mean, you literally sign your name to a piece of paper expressing your interest in testifying at 10 o'clock in the morning, the hearing probably starts at what one typically, and there could be 50 bills and you have no idea when you're going to actually be called upon to testify. Correct. So you could sign up at 10 in the morning for a hearing that starts at one. And I know you personally have had to wait till seven 30, eight o'clock at night, even later. So on occasion to testify on bills. And so 12 hours later, you're still waiting to testify and that's happened to you. Yeah. We had a septic middle one time that I felt bad because I got on at 1122, indicate our opposition to a subject though. But what I really felt bad about was that the secretary of the department of environment got on about five minutes before I did. So he ended up having to wait all that time to get a lot of people understand sometimes how that actually works, but it's an, it's an archaic system. And so one of the things they hope is maybe they can take some of this new protocols and incorporate them into the process forever, really? Because yeah, it'll be interesting because this year you're definitely going to be able to sign up for hearing from your computer at home. You will be able to submit testimony electronically to them. And in fact, they've moved mostly to an electronic system, but you still had, at least as of last year, you had to be actually walk into the buildings in order to use their electronic system. Right? So I think that's going to be very different and to the, that some of that may translate over to a normal year. We'll we'll have to see, but even things like or sessions, which weren't always made public, those are going to be made more public. The hearings you typically could see online, right. But you never really saw the vote sessions, but that's going to be online this year too. So there'll be new ways for the public to actually see what the legislators are doing and also to participate if they want to. So if you're a fan of C-SPAN, then you're going to love watching the general assembly in session. Yes. Those, those, those two fans of our membership that loves scan. Again, I love this. I'll be watching and it's going to be different too. I mean, there, there's still some rules in place. I'll tell you on the house side, they're going to limit testimony to 50 witnesses on the Senate side, it's going to be a lot more restrictive. So on one hand, there's a little more transparency because everybody's going to have an opportunity to watch. Everybody's going to have an opportunity to submit electronically. You don't have to drive all the way to Annapolis to submit your testimony. On the other hand, your opportunity as a public witness is going to be more limited. I think more so in the Senate than in the house. The rules that we seen on the Senate are going to be very limited. Public testimony. Sponsors are going to indicate who those four to six people are going to be testifying and support a bill. And then the committee will try to take a representative group of opponents, but it's still only going to be about four to six members. And then everybody else is submitting written testimony. So we get, we're going to have to be a lot more selective about the bills. We really want to be publicly testifying on. I mean, we all, we already are just given the nature of the work and how many bills get introduced, but definitely have to think that through we're seriously this time, just because there's just not going to be as much public opportunity. Do you think there will be a full 90 day session or my it and early and odd people may not know that under the constitution. The only thing that general assembly absolutely has to do every year is pass a budget. Everything else is optional for lack of a better term. So, and it takes them about half the session about capacity budget, something like maybe a little. Yeah. And you know, they've got an you're right. That is the one thing that they have to do. And I've talked to legislators who, in fact, there are many legislators who that is all they want to do when it comes to session and they want to pass a budget. They want to get out of Dodge after they passed the budget, right. There are many other legislators that have a much more aggressive agenda for the legislative session and to predict whether it's going to be full 90 days or not. I think it's just really hard. And I think if you asked leadership as, and I don't just mean the Senate president and the speaker, I think if you talk to committee chairs and I've talked to a couple, I think everybody is coming in with a view. We're going to meet 90 days. We're going to try and get through the whole session, but all recognizing that if some staff and some legislators start to have COVID symptoms and actually get COVID and then it starts to spread and all bets are off. Sure, sure. I guess we're all doing that. So, and, and partly because of that session has also organized lots of reading, not just in terms of how it's going to happen, but they're trying to front load a lot of bills this year. So leadership has a bunch of priorities. I shouldn't say a bunch, but they've got a handful of priorities. They're looking at. There's going to be a number of bills that never made it out of the shortened session last year, that made it fairly far. In fact, we had a bill last year on property management registration, right. Made it out of the house, but never made it through the Senate before the session ended. So they're going to be a bunch of bills like that, that had been filed last year. That'll get dropped this year. So this huge number of pre-file bills, in fact, there's over 700 of them right now. And how many would there be in a typical year, typical year, you might see 200 to 300 pre files. So it's about double, right? So that's the front loading, the front loading, and they're going to run here. And so they're going to, front-load the session with a bunch of hearings on a lot of these CRE file bills. They're going to actually meet in a very limited way on the floor. So the Senate, because of social distancing, the Senate can actually meet in chambers. The house is actually splitting into two different groups. Oh, I didn't know that. Okay. There's going to be one group. That's going to meet on the house floor and there's 141 house members right then about 71 or two of them are going to end up in the house building. And they are taking a couple of the utility rooms in the house building, making that the house floor annex. Okay. Interesting. And so there'll be a, an appointed leader for the house floor annex and they'll all vote and debate with each other in the two places. And they'll be able to see each other virtually. Oh, interesting. Okay. I didn't know that that's good. And then the hearings are going to be virtual. You know, most of the committee members are going to have the opportunity to either attend hearings from their offices or even from their home if they want it to be at home. So the rules are a little bit different in the Senate and the house on that. And then I think as you get further in session February, that's when they're going to start scheduling more floor sessions and bring some of those bills to vote on the floor. So let's talk about some of the specific pieces of legislation we can expect to see from the legislative leadership committee chairs. Most of it's going to be related to the budget. Even the COVID stuff was pretty much budget related in terms of release and what the state can do on top of whatever the federal government ends up doing. And then a little bit later on, we'll talk about Maryland realtor's legislative priorities. Well, let's start with what you think the state legislative leadership has or plans for the session as far as their priorities go. So a big part of session is going to be those COVID related bills. And some of that is going to depend on what this next COVID package is going to look like that Congress is working on. They've initially passed it, but the details of it aren't really clear yet. So the leaders, at least in Maryland have indicated that unemployment assistance is a key for them, making sure that people are still able to get unemployment assistance. That's going to continue small business health, continuing to be able to provide the grants. In fact, the governor was able in his budget or reprogramming one of his budgets to get even additional grant relief. So there were a bunch of small business loans. The state was given out and they've turned those loans into grants. And then there's going to be a whole host of housing issues. COVID related housing issues that mostly revolve around evictions rental assistance. We know that there will be bills and I don't think they're really leadership bills, but they're going to be bills to limit how much rent can increase. They're going to be bills probably aimed at halting exemptions, or at least there's going to be one major bill that will get very serious consideration. That's going to be ensuring that tenants who are facing eviction have counsel, right? So that'll be a bill that both of the house and Senate committees are going to spend a lot of time on. So as usual, our legislative community, Maryland ruptures legislative committee will be reviewing this legislation. You bring up how many bills in a typical day of legislative committee meeting? I would say normally our committee reviews between 20 to 30 bills each week. And then there are weeks kind of in the mid part of session where we might even do over 40 bills. Yeah. That's just for the listeners who might not know the process. We do have the legislative committee reviews, every piece of legislation that has an impact potentially on real estate or the real estate industry. And they take a position and establish Maryland realtor's position either in favor of, or opposed to the legislation. And then you and your team prepare a statement about that position and make sure that gets to the committee with jurisdiction over the bill to how it works. Yep. What else do you see coming along as far as priorities, especially as it relates to racial issues and equality and housing. So that's going to be a big part of it too. So in addition to those COVID issues, then they're going to be a full host of racial equity issues. One of the key ones is going to be police reform, right? So the committees have already indicated that is maybe even the top priority for them moving forward, at least as a starter session. And then, but the budget is always priority because you have to do that. So that's, that's going to be a big part of it, but then there's a whole host of other racial equity issues. Housing is a big part of that. And I know the leadership looks at housing as part of the solution to the wealth equity gap between white, black families. And I know that they're very interested in ideas on how to close that gap, how to open up housing opportunities, which is something we're very interested, right? So we do know that they're very interested in it. There's going to be a big work group bill that we hope to be a big part of. That's looking at assigning to DHCD the task of coming up with ideas, particularly in the housing realm of opening up opportunity and closing some of those gaps. I mean, there's a 30 percentage point difference between white families and black families in terms of the home ownership rate, which, and CHDD is Maryland department of housing and community development. Thanks. I'll try not to do that

Speaker 2:

The first time.

Speaker 1:

Yeah. So there's that. And I will tell you, I mean, we have even had a couple of legislators reach out to us about what happened on long Island to the newspaper articles regarding the steering racial steering that took place. So they reached out to us, there are a couple of senators who were looking and actually were looking to us for advice on what the legislature can do to help prevent racial steering. So we had some pretty good conversations with them. We brought in some of our members had a very open conversation with them about all the laws that are in place already and different things that we think the state could do to make sure that racial steering is avoided in the future. I do expect there will be some ideas like that in the next couple of years too. Yeah, I agree. The one big issue that I think we're really interested in, and that goes to a lot of the concern about tenants right now is rental assistance. And it's something that we've advocated for national associations advocating for on the federal level, because you can pass as many eviction moratoriums as you want, but this is not forgiveness tenants still rent. And the landlord still has to pay mortgages. They still have those ongoing costs. So rental assistance really is the only solution to this problem. It provides the tenants with the assistance to stay in the property, provides a landlords with the income so that they can continue to maintain the properties in a safe way. And also don't go into a foreclosure themselves, right? So, I mean, that's the only long-term solution to all of this. And I know that there's lots of interest in it. Some of the local County governments who have started their own rental assistance programs, but again, it's a small amount of what's needed. So this is going to get a lot of discussion this year and it's going to be folded into those big budget decisions that they have. And fortunately, I will say on the budget, it's not as bad as everybody was anticipating. I saw that talk a little bit about that. You know, everybody with a shutdown and the economy and the significant limited economic activity that's happened over the last, what is it? Nine months now has certainly depressed all the state and local government revenues, but not as much as they thought income tax revenues have been more stable than they anticipated real estate has been. I won't call it the savior, but it's for sure. Right? I mean, real estate activity on, at least on the residential side has been very strong. That's provided a significant amount of revenue to local and state governments during that time. So in the commercial side is completely different. Of course there were a lot of people expecting that the budget was going to be the only issue we'd be in such dire States, but I don't think that's true. I think it's not great, but it's not terrible either. Let's talk a little bit about Maryland real chores, legislative agenda, not just for the 21 session, but looking ahead, we've been talking a lot about the short, medium and long term approaches and solutions to the disparities in housing opportunity. There's no question. I think we all agree that a big part of the problem is lack of inventory. That it's a double-edged sword. If you're in a home that's appreciating in value, obviously that adds to your own net worth and has a wealth effect. You feel better, people feel better when the stock market's going up, whether they're in the stock market or not. So as a general wealth effect. And as you mentioned earlier, there is a very wide disparity between white homeowners and homeowners of color, particularly black, but even Hispanic and other homeowners of color specifically, what kinds of things can we do to increase the availability of housing? And then hopefully that will address some of the other issues. It's a lot of creative thinking hat there on how to release and unleash, whether it's through land use or other ideas. So what kinds of things might we see short, medium, and long-term to address housing opportunity, but more specifically housing inventory. So, and that's a good way to phrase it's kind of short, medium and longterm because I do think that's the appropriate way to focus on the issue. And there are going to be short term ideas to open up housing opportunity. They're going to focus largely on what can you do today that will help someone tomorrow, right? Get into housing. And those are things that are going to be like, there's been a lot of discussion at the federal level about a home buyer tax credit, right? We know that one of the huge barriers, anybody getting into housing today is the fact that down payment and closing costs is a substantial amount of money. And in order for a young person who might already be carrying 30 to$40,000 worth of student debt that they're trying to pay down in addition to their rent, that becomes difficult for them to save. So that's a huge problem. Maryland department of housing has got some great mortgage programs with down payment assistance that are really seeking to address that. So there's going to be a lot of discussion about, can we get more funding to those programs? And in fact, there's going to be a big bill

Speaker 3:

Dropped in this, what we talked about that in the past. Yeah.

Speaker 1:

So I think on one hand, we're going to like a lot of what that bill does. On the other hand, there is some concern that one of the ways they're going to try and fund some of that stuff is also by taxing rails. We're going to have to work through some of that stuff, but you know, those are really good short-term solutions in terms of, they are things you literally can do today that will have an impact tomorrow. Um, and, and I do think another part of it, which is probably not even legislatively, but it's just making sure people are connected to the resources that exist. So you're a new graduate. You're thinking about home ownership at some point in the future, getting in touch with a housing counselor. And we have plenty of real estate agents that do a lot of this counseling to just say, Hey, here's what you need to do, Maryland home ownership.com. We have great packets of information of what you can do to put yourself in the position of four properties. So that's kind of like short-term solutions. So there'll be a couple of tax credits where we are, have actually talked to a couple of legislators about an idea on the homestead tax credit, which is a really important tax credit for a current homeowner because it reduces the amount of property tax you pay on a property. But sometimes if you've been in a property for a long time, your property tax payment is much, much lower than a new person in that neighborhood. And it actually serves as a disincentive for you to move. Right? So one of the, one of the ideas that we've had is being able to have some transportability of that tax credit. So you've been in your property for 30 years. You really don't want to give up that credit, but you're ready to downsize. I mean, you're in a house probably as a more affordable house because it's an existing house you're willing to downsize. And so maybe you can carry this credit over for about five years or so. Baltimore city has a program like that. And we've talked to some legislators about maybe it's time to look at expanding that what other kinds of things this session could have an immediate impact thinking about maybe things like accessory, dwelling, units, um, things like that. And I guess more broadly, what do you see for in the future longer term, the relationship between state government and local land use control? So I think like accessory dwelling is just to address that there will be a bill, at least as of about a month ago, there was a plan to introduce him on accessory dwelling. So that also I view as one of those short-term there are lots of counties that have rules on accessory, dwelling units. Many of them are pretty restrictive, so that if you're a homeowner and you decide, you want to turn your basement into a fully function, independent living dwelling, and maybe for your parents to come and live with you, or even for a caretaker to come in and live with your parents, counties have different rules about how that can happen. And some of them are very restrictive and it becomes very, very difficult to put an accessory dwelling unit on your property, what we call the old mother-in-law suite. Yeah. Yeah. And then there are counties across the country that permit actually separate dwellings on the property themselves. So it depends on how big your lots are. So there's going to be a bill that is going to seek to establish a floor across all of the counties to say, you've got your, your County accessory dwelling unit must at least permit this. And then the hope is that County will either adopt that kind of minimal standard or it'll default to the state bill. It will give counties a plan in order to amend or change their own ADU legislation to adopt those standards. I think that's the broader question. Philosophically is the relationship between the state and local governments, as far as land use controls, historically, as most people know, not exclusively, but pretty significantly learn use controls are the province has local governments in Maryland counties and cities. And yet at the same time, we are how many tens of thousands of units short of meeting the need. And I guess the question, the bigger question is if exclusive control almost exclusive control on land use, being made at the local level had been working all this time. We wouldn't be in the situation where our members who are listening know this better than anybody. Last year in November, we had average days on market was 24 in November of 2019 in November of 2020. It was eight one year ago. We had about three and a half months of inventory, November of 2020. We are at 1.2 months of inventory. So the market's heating up. There aren't enough properties on the market. The lack of inventory is being reflected in significant price increases, which again is a double-edged sword. It helps you if you're in your house and the value is increasing, but if you're trying to buy a home, you're being priced out of a lot of markets. And so we know that current housing market is out of balance. And so how, the big question that we're not going to answer in 2021, but the big question for the future is how do we allocate the responsibility between the state government and the local governments in order to meet our needs? And that is the big question. And I will say that part of the solution is making sure that local governments marry housing demand with housing need in their counties. And we talk about the fact that local governments really make all of these decisions, these local land use decisions, but they don't do it. It's not like they have complete authority over that, right? The state is always intervened in those decision-making processes. I mean, if you take a look at all the comprehensive plans, which is the basic foundation of what their growth plans are going to be for the next 10, 20, 30 years, there are all kinds of elements that are required to be in those growth plans. They're all, they were all set by state legislature, right? So the state says to them, we want you to do X, Y, and Z. Interestingly enough, up until about two years ago, there was never a housing element right in that. And we supported that bill along with a number of other folks to make sure that that housing element is part of that planning process so that when they're looking to growth in the future, they're trying to accommodate what that need in housing is going to be. We think that we'll go to a long way. There, there are some States that have more directive housing elements in their laws, and there has been some discussion about strengthening our housing element. In fact, there was a bill last session that I think would have tied it more directly to the number of units, making sure that number of units matches me, but we have a whole host of ideas that relate to that. We're still leaving the decisions with the locals, but you're really setting the goal for them, helping them set the goal. And then they have decisions about everything else in terms of where that housing is located and how they match it. And whether they have that need, you know, where, where that need is for them. Right? So we think that we can tie a lot of kind of state bills to that housing element. And it just sets a floor for the counties and the local governments to say, are we meeting housing need? And here are the three steps that we have to take to demonstrate that yeah, we're planning for it. We're pretty confident in our numbers. And if we're going to change our plan in the future, then we've got to make sure that we're accommodating that residential and commercial growth. And in other ways, well, as you can see this, these are big issues. They're complicated issues. These aren't going be answered in 2021. On the other hand, I think a lot of our citizens rightfully are looking for immediate release. So I think we have these competing interests about should having something to show immediately that we are making real progress on these issues that are literally centuries in the making. And the other hand, things are so complicated that they really can't be done in a year or even maybe two. So I think finding not only the balance between various levels of government, but finding the balance between what we can do now and what we want to do in the future. That's also one of our challenges. Thanks for helping us sort through some of these. There's a lot more, we'll have you back after the session to do a recap and to talk about some things that might be coming up in years to come. Thanks for listening. This is get real estate podcast from Maryland. I'm Chuck Caskey, Maryland ruptures CEO, please like share and subscribe wherever you get your podcasts and tune in next time for another real conversation about real estate.