Yesterday, the Senate failed to pass a bipartisan $79 billion tax package, the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). The House-passed legislation seeks to extend various expiring tax provisions from the 2017 and pandemic-related tax bills. (WSJ, Aug. 1 | The Hill, Aug. 1)

Key Points

• Bipartisan Effort: Senate Finance Committee Chair Ron Wyden (D-OR) and House Ways and Means Committee Chair Jason Smith (R-MO) crafted the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). The bill passed the House on Jan. 31 by an overwhelming 357-70 vote.

• Senate Opposition: Despite bipartisan support, the bill faced significant opposition in the Senate, where critics argued it failed to adequately address long-term fiscal concerns and prioritized short-term fixes.

• Roundtable Support: The bill included Roundtable-supported measures on business interest deductibility, bonus depreciation, and the low-income housing tax credit (LIHTC).

• Other provisions in the agreement: Reforms to the child tax credit, the expensing of R&D costs, disaster tax relief, a double-taxation tax agreement with Taiwan, and a large pay-for that creates significant new penalties for abuse of the employee retention tax credit (ERTC) rules and accelerates the expiration of the ERTC. (RW, Jan. 19)

Roundtable Advocacy

• In February, The Roundtable and a large coalition of housing and other real estate groups sent letters to Congress in support of the tax bill. (RW, Feb. 16)

• The Roundtable and the Housing Affordability Coalition’s letter emphasized the importance of advancing provisions in the bill that strengthen the low-income housing tax credit (LIHTC)—along with various real estate investment measures that would benefit families, workers, and the national economy.

• The coalition noted how the bill would increase the housing supply as a positive response to the nation’s housing affordability crisis. It would also suspend certain tax increases on business investment that took effect in 2022 and 2023. 

Congress will return to Washington on September 9, with several critical legislative priorities on the agenda, including decisions on key housing policies and potential new regulations impacting the commercial real estate industry.

The Federal Reserve chose to maintain current interest rates at the same level since last July, despite calls from economists and policymakers to implement a cut. (AP News, July 31 | Axios, July 31)

Fed's Decision

• Fed chair Jerome Powell emphasized the need for data-driven decisions, indicating that future rate adjustments will hinge on economic indicators. (Washington Post, July 31)

• During the June meeting, Fed officials released their Summary of Economic Projections report, which showed that policymakers penciled in just one rate cut this year, down from the three initially estimated at the start of the year. (RW, June 14)

• After the decision, Powell said, "a reduction in our policy rate could be on the table as soon as the next meeting in September." (Barrons, Aug.1)

• In June, Senators Elizabeth Warren (D-MA), Jacky Rosen (D-NV), and John Hickenlooper (D-CO) wrote to Powell, urging the Fed to cut the federal funds interest rates from a two-decade-high of 5.5 percent, citing that high interest rates are increasing the costs of housing and insurance, and exacerbating the housing supply crisis. (Letter)

• In their letter on housing prices, they emphasized that “The country is already facing a severe housing shortage, and the Fed’s refusal to bring down interest rates is exacerbating this shortage and driving higher inflation rates…Lower mortgage rates would encourage more people to sell their homes, which would in turn increase housing supply, decrease prices, ease the costs of renting, and ultimately increase homeownership.”

CRE Markets

• With interest rates unchanged at a 23-year high, the commercial real estate sector faces significant challenges, particularly in financing and investment, as higher rates increase borrowing costs and reduce demand for development.

• Higher interest rates and the pandemic-induced shift to remote work have left a lasting impact on office demand, prompting landlords to rethink space utilization.

• In a recent interview with Bloomberg Television, RER board member Owen Thomas (BXP) discussed the transformation of the office market and the need for innovation and adaptability in the face of changing tenant needs and market conditions. (Watch interview)

The Fed’s next meeting is scheduled for September 17-18, 2024.

In July, the White House announced a nationwide rent control plan that aims to cap rent increases at 5%. Owners of rental housing would only be able to take advantage of depreciation write-offs if they limit annual rent increases to no more than 5%, effectively trading depreciation deductions for price controls.

Economists on Rent Control Proposals

• The White House’s recent rent control plan, while intended to make renting more affordable, would impede the production of much-needed housing, particularly for affordable units. (RW, July 19)

• Last week, The Roundtable and a coalition of national real estate associations, wrote to President Biden expressing strong opposition to the proposed rent control measures. (RW, July 26)

• Economists across the political spectrum widely agree that rent control is a discredited policy. Jason Furman, the former Obama administration's top White House economist, asserts that rent control would worsen housing supply issues instead of solving them.

• A recent study by the University of Chicago surveyed 45 economists from elite institutions, revealing near-universal agreement that national rent control measures would do little to aid Americans and would ultimately worsen the housing shortage. (NMHC, July 30)

Survey Findings:

• No economist agreed rent control would substantially reduce income inequality.

• 2% of economists surveyed agreed that a national rent cap would substantially improve the lives of middle-income Americans over the next 10 years.

• 62% of the economists agreed or strongly agreed that the Administration’s rent cap proposal would substantially reduce the amount of available apartments over the next 10 years, compared to 7% who disagreed.

The Roundtable will continue to encourage policymakers to enact measures that will expand the nation’s housing infrastructure, develop more affordable units and reduce the costs of housing.