Unit 8 Government Powers

Federal government-related agencies that affect how real estate markets operate do not include

Department of Consumer Affairs

Educational assistance

Education is an essential component in creating a viable workforce. A viable workforce encourages businesses to hire, causing increases in employment and income levels. These improvements feed directly into demand for real estate and a consequent increase in real estate value.by providing subsidies for the expansion of educational institutions and for the defrayment of educational costs, the federal government is again influencing real estate value.

Regulation of Real Property Interests: Local, Eminent domain

Eminent domain at the local level often concerns the taking of land for purposes of road improvements and public building projects—a new police station, a park, etc. A property that is likely to be taken by eminent domain loses whatever value it had for future development by the current owner. The owner must accept a "fair value" for the property, but loses all other benefits of ownership.

Which type of federal law limits the uses to which an owner may put a property and creates liability for clean- up where past uses have created air, water, or soil hazards?

Environmental

What right allows the State to take ownership of property left by an heirless and intestate deceased owner?

Escheat

Which of the following is a role of the federal government in land use regulation?

Establishment of broad standards of usage

Fair housing and civil rights legislation

Fair housing laws and civil rights legislation aimed at ensuring that all citizens have the same rights to purchase and enjoy real property affect landlords, sellers, lenders, and business owners, as well as real estate professionals. Such laws may have the result of raising operating costs, leading to a loss in investment return, and, hence, value, for a property.

Federal Regulation of Real Property Interests:

Federal Reserve, Federal Deposit Insurance Corporation, Fannie Mae, Freddie Mac, the Department of Veterans Affairs, the Federal Housing Administration, the Department of Housing and Urban Development, affect how real estate markets operate, with a complex range of possible effects on value.

Which policies are concerned with the control and supply of money for the purpose of assisting stability and growth in the economy?

Federal monetary policies

Describe the kinds of interests regulated at each level of government.

Federal: broad standards of usage, natural disaster, environment, discrimination, land description, lending State: licensing, regional usage, ownership and inheritance Local: specific land use control, taxation Judicial: case law and common law applications to ownership and use

Reporting and disclosure requirements

Financial reporting and disclosure requirements affect the operation of markets and may have an impact on value by increasing the operating costs of financial services providers

HUD programs

Housing subsidies from agencies such as the Department of Housing and Urban Development affect the supply and type of housing construction. there is a population that qualifies for HUD rental subsidies, for instance, developers will build affordable housing that meets HUD requirements. Other types of housing may become scarcer, with a consequent up-tick in values.

Income and capital gains taxation

Income taxes control the availability of disposable income for real estate purchases. High income tax rates, by making new construction less affordable to buyers, are generally bad for homebuilders, but they may be good for apartment owners. Income tax policy directly affects the incentive to invest by making investment income more or less profitable. Government income tax liens, by taking part of a property's value on transfer, reduce the value of the property to the new owner or to the seller.

Allodial System

Individuals are entitled to own property without proprietary control by the king/government. The allodial system and the right of individuals to own property is one of the foundations upon which our country was built. All property in the United States is under the allodial system. laws and regulations at every level of government qualify and limit individual real property ownership and the bundle of rights associated with it

Which type of laws affects the activities of employers, workers, and labor unions?

Labor laws

REGULATION OF REAL PROPERTY INTERESTS Federal regulation Labor laws

Labor laws and regulations affect the activities of employers, workers, and labor unions, with impacts on the costs of goods and services, productivity levels, the growth and decline of particular industries, and the availability of labor pools in particular areas for various industries, among other things. Such factors have an effect on how businesses select locations as well as how families choose where to live.

Federal Regulation of Property Interests Environmental laws

Laws protecting the environment and endangered species directly affect the use of real estate Environmental laws not only limit the uses to which an owner may put a property, but also establish liabilities for clean- up where past uses have created environmental hazards. Costs can be extensive. If endangered species are present on a parcel, normal development may not be possible at all.

Regulation of Real Property Interests: Local Planning

Long-range planning by local governments is the most general and far-reaching of influences on value. It determines such community features as where future roads will be built, where schools, parks and hospitals will be located, which areas will be available for commercial and industrial development and which for residential, where affordable housing will be encouraged, how many people will be allowed to live in an area, how much will need to be provided in the way of sewer, water, and other services, and so on. Each of these decisions has a direct impact on property values by controlling utility, desirability and scarcity of land resources, and, to some extent, the purchasing power of future occupants of the locality.

Flood insurance

Not only will the cost and availability of flood insurance determine where builders will build, it will also control materials, designs, and building methods, all with an effect on the value of a home located in a flood zone will be impacted by the federal requirement for flood insurance. Under federal law, a lender must require a borrower to obtain the proper amount of flood insurance before closing a loan backed by improved real property located in a Standard Flood Hazard Area if flood insurance is available. This increases the cost of the home to the borrower.osts.

The following fall under Federal-level power and influence:

Ownership system Monetary policies Fiscal policies Labor laws Consumer protection laws Environmental laws Loan assistance HUD programs Fair housing and civil rights legislation Flood insurance Income and capital gains taxation Reporting and disclosure requirements Government-related agencies Services (transportation and infrastructure) Educational assistance

What does P.E.T.E. stand for? Briefly explain each item.

Police Power: right of governments to make laws for good of all. Eminent Domain: government can buy property for public good from unwilling private owner. Taxation: government can collect funds to pay for public services. Escheat: government can claim ownership of property that has no legal owner.

Regulation of Real Property Interests: Local Schools

Schools—number, location, quality—are one of the most important factors in most homebuyers' evaluation of a location. The tax levy for schools is also one of the biggest items in most property tax bills. Schools provide a competitive advantage or disadvantage for every neighborhood, area, county, and state. Such details as test scores, percent graduated, expenditures per student, and student-teacher ratios are indicative of school quality. These are all elements more or less under the control of local government.

two types of taxation:

Special Assessment and Ad Valorem. These taxes will take priority in the sale of a home and need not be recorded to be valid.

Which level of government is the primary regulatory entities of the real estate business?

State

State regulation

State governments establish real estate license laws and qualifications. state governments have established real estate commissions to administer license laws and oversee activities of licensees. also exert regional influence in the usage and environmental control of real estate within the state. Relevant state laws might include laws relating to flood zones, waste disposal, drainage control, shore preservation, and pollution standards.

Licensing: State

State licensing of real estate professionals such as brokers and appraisers constrains entry into these occupations and sets standards of performance. constraints and standards affect value by affecting those who work with value as a profession. For example, given the fact that real estate loans are at least partially based on estimates of value developed by appraisers, the quality of appraisal skills used in those estimates is an obvious influence on value.

Development incentives

States often offer economic development incentives to businesses in the form of tax credits, special tax rates, rebates, and similar programs. These incentives, when successful, bring money, employment, people, and demand into local markets.

Services: State Level

States provide many essential services. The quality, type, and availability of these services can provide incentives for real estate developers and users to engage in real estate activities in the state, increasing both demand and supply.

Taxation: Local Level

Taxation of real property is one of the most important sources of funding in many municipalities. The level of taxation affects real estate desirability, supply and demand in the area. Local governments affect rental rates with property taxes, as owners must raise rents to cover operating expenses. Taxation affects property value by making the property more or less expensive to operate than another property and hence more or less attractive to a buyer. If property taxes on a parcel are relatively high, the market value is likely to be negatively impacted.

Services

The Federal government provides many services that have an impact on property. The list is probably endless, but it includes at least: maintaining economic stability providing for public security building and maintaining national highways, bridges, and other transportation infrastructure creating or subsidizing the power grid subsidizing communications regulating and maintaining public lands creating and maintaining parks and forests for recreational purposes protecting public health protecting the environment supporting research and development ensuring fairness of competition

Regulation of Real Property Interests: Judicial Judicial regulation

The judicial system exerts an influence on real estate ownership and use through decisions based on case law and common law, as distinguished from statutory law. Case law consists of decisions based on judicial precedent. Common law is the collective body of law deriving from custom and generally accepted practice in society.

Regulation of Real Property Interests: Local, Services

The local level is where the affect of services on value is most apparent. The existence, availability, and quality of services may vary from one locality to another and very directly affect what a buyer is willing to pay for a property. Critical local services, in addition to schools, include: police, fire, health care, recreational facilities, utilities, refuse collection and disposal services, transportation systems, communications and information systems, infrastructure, emergency services, entertainment facilities, flood control, and social services.

Police power: Local Gov't

a government's police power is the authority to enact laws to guard the safety and health of its citizens, maintain order and promote public interests. The majority of the local influences fall under this classification—particularly taxation, zoning, and planning.

Regulation of Real Property Interests: Federal Monetary policies

concerns efforts to control the supply of money for the purpose of assisting stability and growth in the economy. Through the control of interest rates and the buying and selling of securities, money is made more or less available for purchases and construction. Less financing available; the higher the interest rates and slower the RE market

Fiscal policies

concerns how the government collects revenue and makes expenditures on various services. fiscal policy is also about the distribution of money and the speed with which it moves through the economy. changes in taxation and spending can impact aggregate demand, prices, and the general level of economic activity.

- Federal government activity dealing with taxation and spending is an example of

fiscal policy.

Regulation of Real Property Interests: Federal, Ownership system

grants individuals the benefits of property ownership that we translate into real property value. Federal statutes, regulations, and court decisions affect ownership rights every day and can limit them in numerous ways that affect value, such as by outlawing certain uses, or by declaring certain lands to be publicly owned. Federal statutes, regulations, and court decisions affect ownership rights every day and can limit them in numerous ways that affect value, such as by outlawing certain uses, or by declaring certain lands to be publicly owned.

State income taxation

income taxes at state level influence real estate values by making more or less money available to consumers and investors for purchases and construction and by increasing or decreasing the profitability of investment. States that do not tax income or have a low tax rate can provide a considerable incentive to businesses and residents who are looking for relocation possibilities.

Police Power

is the right of the local, state, and federal government to make laws for the good of all.

The Americans with Disabilities Act,

its access requirements for the disabled, may require a landlord, owner, or business operator to remodel a structure to conform with the law. This capital investment will lower the value of the property to the owner, but may raise the price for a subsequent purchaser.

Regulation of Real Property Interests: Local, Occupancy rules

limit how many people may occupy a dwelling or a part of a dwelling. Such rules are common in localities that have a high density of college students in the population. As renters, many students would like to reduce housing costs by sharing rental space with as many people as possible. Municipalities tend to regard this over-occupancy as a safety concern. But by placing a limit on occupancy, they may be limiting the amount of rent a landlord can charge, and thus reducing the investment value of the property.

P.E.T.E

private home ownership is subject to government interference called P.E.T.E. Police Power Eminent Domain Taxation Escheat

Eminent domain: State Level

states are also empowered to take land for public purposes.

Federal Regulation of Property Interests Consumer protection laws,

such as the Equal Credit Opportunity Act and the Real Estate Settlement Procedures Act, affect how the real estate business is transacted and might affect value in unforeseeable ways.

Federal Regulation of Property Interests Federal loan assistance programs

such as those provided by the Federal Housing Administration and the Department of Veterans Affairs, enable qualified buyers to undertake larger mortgage loans than would have otherwise been possible. This allows them to buy more expensive homes, creating an upward pressure on home values.

Name the aspects of real property interests that are regulated by government.

the bundle of rights legal descriptions financing insurance inheritance taxation

government entities regulate the following aspects of real property interests:

the bundle of rights: possession, usage, transfer, encumbering and exclusion legal descriptions financing insurance inheritance taxation

Planning: Local Level

the most general and far-reaching of influences on value. It determines such community features as where future roads will be built, where schools, parks and hospitals will be located, which areas will be available for commercial and industrial development and which for residential, where affordable housing will be encouraged, how many people will be allowed to live in an area, how much will need to be provided in the way of sewer, water, and other services, and so on. direct impact on property values by controlling utility, desirability and scarcity of land resources, and, to some extent, the purchasing power of future occupants of the locality.

Escheat

the right of the government to claim ownership of property for which there is no legal owner. When an owner dies without a WILL and without HEIRS, the property reverts back to the state. Similarly, if the property is abandoned (through lack of paying taxes), the ownership of the property goes to the state.

Escheat: State Level

the state's right to take ownership of property left by an heirless and intestate deceased owner.