The new tax plans that have passed in the House and Senate could impact housing demand and construction. To find out more, we sat down with Andrew Starrels, a partner at Holland & Knight LLP, for an exclusive interview. Here, we ask how the plan could impact home construction, deductions taken by investors and his advice to investors.

GlobeSt.com: How could the federal tax plan affect Los Angeles home construction?

Andrew Starrels: There are several issues packed into this question. First, it's important to remember that for many taxpayers, the mortgage interest deduction for federal income tax purposes has been a vitally important tax planning strategy for generations, and has been a determinative factor in individual decisions to purchase a home. This is especially important in California, where property values are higher than in other parts of the country, and homeowners have significant amounts of their personal wealth committed to their residences. Both the bills approved by the House and the Senate will reduce the amount of deductibility for mortgage interest, and to the extent that the new tax scheme removes incentives for home ownership, it will affect housing affordability and potentially drag down home construction. The homebuilding industry has been lobbying to retain the deductibility of mortgage interest because of the potential that reducing deductions can have on housing demand, and the issue potentially affects first-time buyers as well as owners looking to “trade up.” To the extent that this reduces demand for new home construction in and around Los Angeles, that will have an dampening effect on housing construction and on well-paying construction jobs. I should also note that the overall impact of the tax bill on after-tax income, because of the removal of other deductions, could also affect housing demand and in turn home construction.