Midyear Report: Reflections on RPPI #2 – Impact & Next Steps

This post, and this series of reports and opinions from NAR Mid-Year 2011, brought to you by:

Now that the RPPI (formerly known as RPPSI) has been approved by the NAR Board of Directors… what is the actual impact? Passing the thing was just the first step. The absolutely critical work of implementing whatever programs the RPPI enables comes next, and here is where the future of NAR and of the industry may be set in place.

I offer some observations from Midyear itself, as well as opinions both well- and ill-informed.

RPPI Does Not Mean Automatic Win

Whatever else happens, and however RPPI is implemented, one thing became extremely clear: RPPI will not result in short-term victory. The three big issues that NAR is working on right now — the MID, the QRM(20% downpayment rule in Dodd-Frank Qualified Residential Mortgage regs), and the Fannie/Freddie issue — are unlikely to be affected all that much.

During a Q&A period with Dale Stinton, CEO of NAR, I asked how much would the RPPI move the needle on political issues. In other words, is it the case that without passing RPPI, NAR would just get crushed on all three of the Big Issues, but with it, NAR would prevail on all three? Two of three?  Or is it that by investing another $200M or so into political campaigns, NAR might see a 10% improvement on success rate?  I knew it was impossible to quantify something like lobbying efforts, but basically, I wanted to know just how big a game-changer is RPPI?

To use an analogy, is RPPI a first pick overall that lets you pick up a franchise quarterback like Peyton Manning? Or is it more like a sixth round pick that might improve your interior defense a bit?

Dale’s answer was that RPPI is a long-term strategy. He didn’t know whether passing it would have an immediate impact on the Big Issues confronting NAR right now, today. But he did feel that without it, over the longhaul, NAR’s power would diminish significantly and it would not be able to be as effective as it was say… two years ago.

That seems right. And I confirmed it in conversation with one of the chief lobbyists for NAR. He’s one of the in-the-trenches guys who speak to Congresscritters and regulators every day. And his thought was that RPPI was unlikely to have a major impact in the short term: things had advanced too far along to have a dramatic, last-minute impact on something like the QRM. But he felt that having it would help for the next issue that might come down the pike, whatever that is.

I wrote yesterday that NAR had, with the RPPI vote, put itself on a “wartime footing”. Well, RPPI is basically a vote to increase spending on defense. Your entire Pacific Fleet just got decimated at Pearl Harbor; increasing defense spending now is not going to do much for you in the next year or two. But without it, you won’t have a chance three or four years from now.

It’s the long-game.

That raises the question, of course, of how to spend the money and what to spend it on. Okay, you’ve increased defense spending by $100 billion — do you buy more ships? Train more troops? Put money into advanced weaponry? The real decisions get made now.

Real Decisions

The first real decision that NAR has to make, now that RPPI is passed, is whether or not to conduct increased Independent Expenditure campaigns. These so-called IE campaigns are at the crux of the RPPI issue, and quite frankly, I’m not sure how many of the Directors who voted for or against RPPI really knew the difference.

Let’s take a moment and outline broadly the four or five political things NAR does. I know this is going to be very rudimentary and missing lots of detail, and may very well be wrong, but I think it would be helpful. Or your money back (although not Zillow’s money back, since they are sponsoring this wonderful series you’re reading).

  1. NAR spends money on Lobbyists. This came out of the general treasury in the past, and will in the future. There is no restriction on hiring people to go ask government officials for stuff.
  2. NAR spends money on Issue Advocacy. These are ads, campaigns, communications that have to do with a specific issue but never mention a candidate or a politician by name. We’ve all seen the “Call your Congressman and urge him to sponsor the American Patriot Act To Empower Black Transgendered Union Steelworkers” kind of ads. That’s Issue Advocacy. NAR could always spend money from the corporate treasury on these, as could anyone. Issue Advocacy cannot mention any candidate by name nor any party, because it is a supposedly non-partisan communication.
  3. NAR spends money on Organizing. Again, NAR always spent corporate treasury dollars for this, and always could. Setting up things like the REALTOR Action Center, hiring people to run Issue Mobilization, etc. all take money to do. Setting up phone banks, renting out office space, sending out fundraising letters, etc. would all fall here.
  4. NAR spends money on bribes direct donations to candidates. Direct political contributions are strictly limited, heavily regulated, records kept, and must come from “hard money” — funds that were given specifically for supporting political campaigns. RPAC dollars are used for these.
  5. NAR spends money on Independent Expenditures. The FEC defines Independent Expenditures this way:

Under federal election law, an individual or group (such as a PAC) may make unlimited “independent expenditures” in connection with federal elections.

An independent expenditure is an expenditure for a communication which expressly advocates the election or defeat of a clearly identified candidate and which is made independently from the candidate’s campaign. To be considered independent, the communication may not be made with the cooperation, consultation or concert with, or at the request or suggestion of, any candidate or his/her authorized committees or a political party, or any of their agents. While there is no limit on how much anyone may spend on an independent expenditure, the law does require persons making independent expenditures to report them and to disclose the sources of the funds they used. The public can review these reports at the FEC’s Public Records Office.

If you want some more in-depth info, including contribution limits, read this handy brochure from the FEC.

What Citizens United did is to treat corporations and labor unions the same as an individual or a PAC, and allowed them unlimited Independent Expenditures for or against a specific candidate, using general treasury funds. And I’m sure if you’re still reading this, you’ve already read all of the reasons why NAR decided it needed to launch the RPPSI (now RPPI), so that it can engage in far more independent expenditures.

Here’s the critical point that I really think quite a few NAR Directors who supported RPPI did not understand: NAR could have always, without RPPI, spent treasury dollars on Issue Advocacy and on Organizing. There was quite a bit of rhetoric about how NAR needed to step it up, defend homeowner rights, and so on. But it could always have done that with or without a dues increase. The real impact of the RPPI vote, then, is not only that NAR will have more money to devote to political issues, but that it will ramp up the amount of Independent Expenditures naming specific candidates.

At the same time, quite a few of the critics of RPPI make it out to be more than what it actually is. There are cries of outrage that NAR will now take dues dollars and give it to some candidate whom said member opposes. That, NAR will not and cannot do. Independent expenditures have to be independent; not a penny of NAR member dues is going into some candidate’s campaign fund. (Let’s just assume and pretend, for the sake of discussion, that all independent expenditures are really independent, and not influenced by hints and behind-the-scenes whispers and such.)

It may be a difference without distinction, of course, since if NAR is running ads for Harry Reid’s re-election, and you don’t get the “I’m Harry Reid, and I approved this message” thing at the end of the ad… the Republican REALTORS of Nevada might be nonplussed. But it is a difference, however slight.

Investing in Independent Expenditures Will Be A Mistake

I have already suggested that going down this path will be a mistake for NAR. The nearly uniform negative response from the NAR membership suggests to me that it will be a mistake.

So this is the decision to watch, examine, and debate.

I happen to think that NAR is not necessarily committed to pursuing Independent Expenditures as the main strategy. During Midyear, NAR’s CEO Dale Stinton made the point that RPPI would allow NAR to invest in “thousands of points of power” across the country, referring to each Association. He specifically mentioned that NAR would be purchasing national voter data, that shows a great deal of information about who voted when, where, and for whom. You don’t purchase that kind of resource if your intent is just to throw money at politicians.

If NAR decides to use the RPPI funds not in tons of Independent Expenditures, but in building out this sort of infrastructure, much of the anger could dissipate. I emphasize the word “could”, as it “maybe”, “perhaps”, “ya never know”. I sincerely hope this is the direction in which NAR, the state and local Associations are thinking.

If, on the other hand, NAR goes full speed ahead with IE’s on behalf of candidates… and throws a few million into Dianne Feinstein’s Senate race (to pick just one example, since her seat is up in 2012)… expect the fit to hit the shan.

A Question for RPPI Opponents

In the spirit of looking for solutions, rather than cryin’ over spilled milk… given that RPPI has passed, is there any way it can be made palatable to those of you who opposed it? What sorts of things would NAR have to do to make you think less badly of RPPI? Is there anything NAR can do?

Questions, comments, arguments (non-personal), and such welcome, as always.

-rsh

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Rob Hahn

Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

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1 thought on “Midyear Report: Reflections on RPPI #2 – Impact & Next Steps”

  1. If there were no Independent Expenditures in the RPPSI proposal than I would have no issue at all with it.  I believe in our advocacy and think we should strengthen it.  My only issues comes with the IE’s and as long as they are in the proposal it is a deal breaker for me.  They do the other things you mentioned with the money and they have my full support.

    Money to be used in this manner has to remain voluntary through RPAC.

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