The 2011-12 legislative session will be a difficult one, as the state struggles with a challenging economy and a significant budget deficit. Wisconsin’s real estate markets face a similarly challenging year, with hopes of starting to reverse declining home sales and stabilize home prices.

With a new governor, new administration and new legislative majorities in both the State Assembly and Senate, there is a new opportunity for the WRA to demonstrate the irrefutable link between the state economy, budget and real estate market. The inevitable conclusion is real estate holds the key to Wisconsin’s economic revival.

Impact on the economy

Understanding the connection between the state’s economy, budget and real estate market is the first step toward finding solutions to our current economic and fiscal problems. The real estate industry has historically generated between 15 and 18 percent of the national gross domestic product. Despite a down market, real estate holdings in the U.S. were valued at $16.5 trillion (Q1 2010). In Wisconsin, the real estate industry constitutes approximately 14 percent of the gross state product. Every $100 spent on real estate generates an additional $44 in spending on related products and services in other sectors of the economy.

Impact on government revenues and quality of life

The property tax is the largest tax in Wisconsin, generating $10.1 billion (gross) in 2009-10 ($9.1 billion net after tax credits) for local governments, according to the respected Wisconsin Taxpayer’s Alliance. Property-related taxes and fees provide well over 90 percent of all local government revenues. Property taxes are levied for K-12 schools, technical colleges, municipalities, counties and special districts.

Property taxes increased 4.3 percent in 2009-10 over the previous year. Responsible for the increase were schools, up 6 percent, and technical colleges, up 3.9 percent. Property taxes have increased in Wisconsin every year since 1980, except for 1997 when the state first implemented the two-thirds state school funding formula.

At the state level, the tax on real estate transfers generated $4.3 million in 2010, nearly 8 percent more than the previous year. However, these collections were far less than the amount collected in previous years when home sales and values were higher. For example, the tax ($3 per $1,000 of value) generated $80.5 million in 2006 and $71.7 million in 2007, before the decline in the national housing market began.

For our quality of life, homeownership produces tangible social benefits, including improved educational achievement, civic participation, better schools, lower crime and improved property values.

These numbers lead to one conclusion: Wisconsin’s economy and quality of life cannot recover until Wisconsin’s real estate markets recover.

WRA legislative agenda

As the new slate of state policy makers settle in, the WRA has been actively promoting a legislative agenda that recognizes the link between the state’s economy, budget and real estate market and will be encouraging lawmakers to adopt policies to improve Wisconsin’s real estate industry. Specific recommendations are being advanced under these four major goals:

1. Economic and job development: Encourage greater economic development and job growth in Wisconsin by providing additional incentives to attract new businesses, retain existing employers and stabilize local economies.
2. Real estate transactions: Improve the real estate market in Wisconsin by reducing real estate transaction costs, protecting consumer choice in real estate services, and clarifying regulatory uncertainties related to real estate professionals.
3. Regulatory reform: Improve the regulatory climate in Wisconsin by creating greater certainty for property owners and permit applicants, streamlining the permitting process, and eliminating unnecessary regulations and penalties.
4. Tax reform: Improve Wisconsin’s real estate market by reducing the tax burden related to the ownership and transfer of real estate, and health care costs for independent contractors.

Focusing on improving Wisconsin’s real estate industry will, at the same time, improve Wisconsin’s economy and budget. The work on all three has now begun.

Michael Theo is Senior Vice President of Legal and Public Affairs for the WRA.