At the 2011 Association Executives Institute meeting in Dallas, NAR has put forth a bold if risky plan it is actually calling the “Political Survival Initiative“. In short, NAR will launch a “REALTOR Party” that will go beyond simple issue advocacy to full-blown political support for individual candidates based on issues NAR considers important (e.g., mortgage interest deduction, financial support for housing, state transfer taxes, etc.). Please view the presentation, the talking points memo, and the NAR legal memo on Citizens United if you are interested in detail. Or just keep reading then decide if you are interested.
My initial take is surprise combined with real concern. This Political Survival Initiative could either be the most brilliant thing that NAR has done in decades (having done little to nothing with HouseLogic, that is), or be the first step towards total irrelevance. It’s a big risk. I may have to revise my opinion about NAR 800K to something closer to NAR 400K, which is not necessarily a bad thing, but the face of organized real estate could change rather dramatically, and rather soon.
A Little Background
As the talking points memo says, this did not happen overnight. NAR has already tested out the concept in the 2010 elections. From the Politico post on the subject:
The model: the “Realtors’ Party,” the moniker the National Association of Realtors gave to its $6.5 million election effort, which backed a bipartisan slate of 103 pro-Realtor candidates and saw election of 66 of them.
And even more critically, the REALTOR Party focused on some tough contested races:
It maximized its impact by taking on sizeable roles in just 11 races, including some of the hardest fought contests, and its candidates won in eight of them. Of the candidates selected to receive maximum support from the association, five were Republicans and six were Democrats.
The political establishment notices these things, even if the rest of us are too busy trying to figure out who the next American Idol is going to be.
And where there is victory, there are spoils:
Perlmutter’s post-election calendar has already included several appearances and meetings with Realtor groups in Colorado and in Washington and there is more to come.
Congressman Ed Perlmutter (D-CO) was one of the 8 that the REALTOR Party went to bat for in 2010. Those meetings appear to have paid off:
Washington, DC – Today, U.S. Rep. Ed Perlmutter (CO-07) voted to help communities rebuild areas hit hard by the foreclosure crisis by supporting the continuation of the Neighborhood Stabilization Program. Perlmutter voted against a Republican-led “so be it” bill to end the successful Neighborhood Stabilization Program (NSP) that has made a difference in communities across the country, particularly in Aurora, CO and the 7th Congressional District.
Unfortunately, because of the Republican dominance in the House, Rep. Perlmutter’s “nay” vote was for naught — although the Democrat-controlled Senate is expected to oppose the House’s cuts. Nonetheless, the important point to keep in mind is that the NSP was, and remains, controversial. There is not agreement on all sides. The Republicans, for example, charge that the NSP is wasteful, creates moral hazard, and ineffective in any event:
This program has been plagued with problems since its inception and operates without the proper reporting, oversight, and accountability mechanisms that are necessary to protect taxpayers and ensure funds are being used properly. This program is a taxpayer funded bailout for the lenders, servicers and real estate speculators who made risky bets on the housing market and will now be able to offload their foreclosed properties onto the taxpayers. The NSP does nothing to help homeowners facing foreclosure and instead incentivizes lenders to foreclose on properties rather than attempt to work with homeowners. Rather than continue to spend money we do not have on programs that do not work, Congress should focus on creating the certainty job-creators need for economic activity and hiring.
Whatever the future of NSP and other programs in Washington DC, it does make sense for NAR to expand a program that has proven so successful in the 2010 election cycle.
So it will.
The Expansion: Political Survival Initiative
In the 2010 election cycle, it appears that NAR used only “hard money” dollars for political advocacy raised through RPAC and other vehicles under which individual REALTOR members donate funds specifically for political action. Going forward, NAR will use “soft money” — in other words, the money in its treasury collected directly from member dues — for political action.
As Politico touches on, the Supreme Court’s ruling on Citizens United, will allow NAR and other industry trade organizations to use whatever funds it has and wants to on directly supporting individual political candidates. (Of course, Citizens United was and remains extremely controversial, especially on the Left.) There are some limitations on how such soft money can be used by corporate entities, but for all intents and purposes, Citizens United allows unlimited use of all kinds of funds for political action.
This NAR will do.
Considering that in 2008 (the last year in which I can find a Form 990 for NAR), NAR’s political lobbying expenditures (what we’d normally consider political action) were $18.2 million vs. a total operating expenses of $182 million, the announcement that NAR will start to use its general funds for political action is indeed a game-changer. (Incidentally, NAR itself reports that it spent $12 million in the last election cycle; one would expect that a presidential year, 2012, will be huge indeed.)
And in order to do that, NAR has announced that it will raise membership dues by $40 per year, effective in 2012. Assuming that NAR maintains its 1 million or so membership, that would equate to an additional $40 million for political action, on top of whatever other funds NAR has already invested and will invest. And maybe I’m not reading this right, but the talking points memo mentions that once the $40 increase goes into effect, fully half of NAR’s total budget will be dedicated to political advocacy. Based on 2008 numbers, that means NAR will spend over $110 million a year ($182 million + $40 million = $222 million, and half of that) on local, state, and federal races.
Yeah, that’s a game changer all right.
First, let’s look at the positives of this initiative. It is a very clear expression of the fact that NAR and the local and state boards exist primarily as a political organization. As any Association leader will tell you, political participation by the membership is absolutely dismal. Most Association members join not because they care all that much about political issues, but because they “have to” in order to get access to the MLS. Some have expressed the fear that if they’re not a member of the Association, other REALTORS in the market area will blacklist them in clear violation of various antitrust laws, but impossible to prove.
Associations spend a great deal of time and money thinking about, talking about, and offering various services that enormous chunks of their membership couldn’t care less about — from social media training to networking events. They talk a good deal in public about the Code of Ethics and professional standards, but the few ethics violation complaints appear to have little to nothing to do with consumer protection… and the proceedings are all sealed and top secret in any event, even to other REALTORS, so no one actually has any clue what the Association is doing to enforce professional standards.
As a result, it’s often difficult to know what exactly it means to be a REALTOR. With this initiative, it is finally clear. Being a REALTOR does not mean higher standards, more training, more consumer focus; it means a real estate licensee who is politically engaged, a member of the REALTOR Party. So you can be a member of the Democratic Party, the Tea Party, and the REALTOR Party.
Furthermore, 2010 did show that direct political action works. NAR won the 8 of 11 campaigns, and 70 of 92 other races, and boasts a 76% win ratio in 2010. With even more money to pour into the 2012 election cycle, a presidential election year, NAR will be a formidable player on the state and federal scene. There is little doubt in my mind that various politicians and their advisors will be thinking long and hard about voting to kill Fannie Mae and Freddie Mac anytime soon.
On the other hand, I’m uncomfortable with some aspects of this initiative from a purely strategic standpoint. The focus on the money might be slightly misplaced (or it might not be, as a defensive measure).
Citizens United does mean that NAR can spend corporate funds from dues on supporting candidates. That’s true. But it also means that other deep-pocketed organizations, corporations, and entities can do the same. The Politico article already speculated on such things as the Ethanol Party. And while $110 million is quite a huge sum of money, George Soros alone could outspend NAR if he chose to.
One issue comes to mind. This is pure paranoid speculation, mind you. For years, I’ve heard that one of the signal achievements of NAR was keeping the banking industry out of real estate brokerage after the Federal Reserve proposed to allow it after the Gramm-Leach-Bliley Act of 1999. Indeed, the power of NAR is on full display here:
The controversy is so important to members of Congress that FY2003 Treasury appropriations were frozen and could not be used to promulgate the proposed regulation. Congress again expressed displeasure at the prospect of banks engaging in real estate brokerage and management when it again prohibited FY 2004 Treasury appropriations from being used to finalize the proposed regulation.
If money were the deciding factor in influencing policy, then what stops Bank of America, JP Morgan Chase and Wells Fargo — any one of whom could outspend NAR out of its corporate treasury — to finally push through legislation enabling real estate brokerage services to be offered out of their local banks? Applying for a mortgage, are you? Let me introduce you to our in-house real estate agent… who by the way is free, if you get the mortgage from us.
Furthermore, in light of the importance — and the sure-to-follow controversy as detailed below — the way that NAR is rolling out this program is questionable. A change this monumental likely needed quite a bit more public debate and efforts to convince existing NAR membership that this was the way to go. As it is, I predict that announcing it at the AEI meeting as a fait accompli is going to cause quite a bit of unhappiness among the membership. The timeline for approving the initiative — May 14th at the NAR Mid-Year Board of Directors meeting — means a scant two months or so for NAR members to comment one way or the other about the initiative.
I have deep reservations about that, considering how disengaged and apolitical most of the current membership is. People who otherwise paid no attention whatsoever to political issues will first hear “$40 dues increase” — and for many, that is all they will hear.
Which leads us to the truly worrisome part of the Political Survival Initiative: NAR is quite likely going to start shedding members left and right.
Human beings are rarely single-issue voters. Politics, for those who are interested in it, is a complex, multi-issue thing. No candidate is ever perfect on all of the issues; thoughtful voters (and supporters) simply do a pro-con analysis and decide to support a candidate despite disagreements. For example, I am a huge fan of Chris Christie, but I think his push to make solar energy viable in New Jersey is a fool’s errand.
Traditional cash contributions are so valuable not only because of the money, but because someone who is motivated enough to donate to a candidate can be counted on as a true believer, who will go far beyond just writing a check. Candidates can count on donors to tell their friends, convince family members, put up signs, volunteer for them, go door-to-door, and do all of the retail politicking that they need beyond money for advertising.
With RPAC and the way that NAR has traditionally done political advocacy, it wasn’t simply the enormous sums of money that candidates had to court, it was also the votes and the support of those thousands upon thousands of politically engaged REALTORS, especially back in their home districts.
What the REALTOR Party does is eliminate quite a bit of that grassroots support element. In fact, it subverts it.
Let’s say that in 2012, there is some Senate election that will be hotly contested. Let’s throw in some stereotyped candidates here for discussion purposes. The Republican candidate is a warmongering, anti-abortion, cut government at all costs Tea Partier opposing gay marriage who wants the Mexican border patrolled by giant robots with machine guns; he had Sarah Palin and Glenn Beck in to campaign for him. The Democrat is a global warmist who supports Obamacare, wants to downsize the Department of Defense, thinks that teachers, cops, and firefighters shouldn’t have to pay a dime towards their healthcare or retirement, hasn’t met a welfare program he didn’t like, and not only wants to keep the borders open, but put in rest stops in the desert to make sure the illegal aliens aren’t thirsty along the way.
Is there any doubt that even amongst REALTORS, opinion would be sharply divided and polarized? But because the Democrat supports maintaining the mortgage interest deduction, keep Fannie and Freddie around for decades more, and other sundry issues that the REALTOR Party likes, it will run political advertising supporting Mr. Democrat against Mr. Republican.
How many of NAR’s Republican members in that district will remain NAR members afterwards, knowing that their dues dollars went to support a candidate they passionately oppose? Or if it went the other way, and REALTOR Party dollars went to the Republican who votes to make abortion illegal, how many NAR members would throw an absolute fit?
People can get extremely passionate about big issues. And not all big issues are real estate issues. In some cases, REALTORS may recognize that self-interest as a REALTOR might dictate one thing, while their other ideals dictate a whole different response. I know for a fact that there are conservative Tea Party Republican REALTORS; such members just might be willing to sacrifice the mortgage interest deduction for the sake of fiscal sanity.
As long as NAR only used hard RPAC dollars, which required that the member had to write a check personally, thereby agreeing to support that candidate or that party, member dissatisfaction can be controlled: you didn’t like Candidate XYZ that we supported, but you didn’t contribute to Candidate XYZ so chill out. After this initiative, that answer is no longer availing to NAR and the state Associations. Because that member’s dues did go to support a candidate she thinks is a disaster on many levels.
From a timing standpoint, 2010 marked a point where millions of previously disengaged Americans came out in droves to get involved in politics. Politics is now an important part of everyday conversation, because what is happening in state capitols (public unions, pension problems, etc.) and Washington DC ($15 trillion debt) has engaged the American mind.
The ugly result is that NAR will lose members. How many and how quickly is unknown, but if this plan goes forward, it will happen. Politics is too passionate, too incendiary, too divisive in the United States today for it to be otherwise.
And once NAR loses members, instead of increasing them, and Citizen United allows other big-money interests to unleash their funds for direct political action… it becomes a bidding war to see who can buy the politician’s votes. On that front, I’m not sure that NAR has the advantage over the banks, the unions, commercial multifamily developers, and others.
The Essential Error
I think the essential error is a fundamental mistake by the NAR leadership: that economic self-interest trumps all. I don’t believe that. With this initiative, NAR has elevated the importance of fundraising over that of increasing political awareness and involvement amongst its membership, on the assumption that all REALTORS, of every party, of every political belief, would be united in wanting government support for housing, and that they would sacrifice other deeply held beliefs — about immigration, about abortion, about gay marriage, about size of government, about foreign affairs — to defend support for housing.
Time will tell.
But a final caveat and warning. Woe betide the REALTOR Party if the national mood in 2012 is sharply against government spending and government subsidies, and the Tea Party really does take over the Republican Party (as they are doing right now). Congressional Republicans are already shutting down quite a bit of housing-related government programs. If NAR goes against them, and the GOP has another historic election as it did in 2010… all of NAR’s friends on the Hill will end up being in the minority.
And there will be payback then.
So… there we have it. A bold move, but a risky venture. This promises to be an interesting year.