Author: Abigail Grenadier

Lawsuits Mount Against SEC Climate Rules

Posted on by Abigail Grenadier
The U.S. Securities and Exchange Commission (SEC) headquarters in Washington, DC.

Almost two dozen Republican-led states have sued the U.S. Securities and Exchange Commission (SEC) over its climate corporate disclosure rules released last week. (Bloomberg Law, March 12 – paywall | Roundtable Weekly, March 8)

Litigation Gauntlet

  • GOP attorneys general in 22 states allege the SEC acted beyond its authority by requiring companies to report certain GHG emissions and costs related to extreme weather.
  • The U.S. Chamber of Commerce joined the “legal salvo” against the SEC. (POLITICO, March 15).
  • An SEC spokesperson stated the agency will “vigorously defend” petitions filed in the federal appeals courts for the Fifth, Eighth, and Eleventh Circuits. (Bloomberg Law, March 12)
  • These suits will likely rely on the “major questions” doctrine, raised in a 2022 U.S. Supreme Court decision that curtailed EPA’s authority to fight climate change. The doctrine provides that a federal agency must have “clear” authority from Congress to regulate issues of “vast economic and political significance.” (E&E News ClimateWire, March 11)
  • Meanwhile, environmental groups filed their own counter-suit in the D.C. Circuit. They claim that the SEC’s rules are too “water[ed] down” and fail to provide investors with “material” information on a company’s financial exposure to climate risks. (Newsweek, March 14).
  • It will take months for the SEC to run this court gauntlet. The November elections could shape the legal outcome before the suits are resolved, depending on which party controls Congress or the White House.

RER “Fact Sheet”

The Real Estate Roundtable's March 12, 2024 Fact Sheet on "What CRE Needs to Know" about the SEC's Climate Disclosure Rules.
  • Assuming the SEC’s rules are not delayed, the largest public companies must comply with climate-related disclosures in Form 10-Ks filed during fiscal year 2025. (SEC fact sheet, March 6)
  • The Real Estate Roundtable has issued its own fact sheet summarizing “What CRE Should Know” about the SEC’s final climate disclosure rules. (RER Fact Sheet, updated March 12).

The Roundtable’s Sustainability Policy Advisory Committee (SPAC) continues to study the new SEC regulations and plans to hold educational sessions at its June 21 meeting in Washington as part of RER’s annual meeting.

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Treasury Collection of Beneficial Ownership Information is Ruled Unconstitutional by Federal District Court Judge

Posted on by Abigail Grenadier
The U.S. District Court for the Northern District of Alabama

Beneficial ownership regulations that took effect Jan. 1 under the Corporate Transparency Act (CTA) were ruled unconstitutional on March 1 by a federal District Court judge, who sided with claims by the National Small Business Association against the U.S. Treasury Department. The Roundtable has strongly supported NSBA’s legal challenge. (NSBA v. Janet Yellen ruling and NSBA’s website on the CTA | Industry coalition support of NSBA law suit, Dec. 7, 2022)

Impact of Ruling

  • Alabama Judge Liles Burke’s ruling applies only to the NSBA and its members, although the court’s decision likely paves the way for further challenges to the CTA.
  • FinCEN issued a statement on March 4 that it will “comply with the court’s order for as long as it remains in effect” and will not enforce the CTA against the named plaintiffs in the case. What goes unsaid is that FinCEN intends to continue enforcement of the CTA against non-parties while the case works its way through the federal court system. As a result, firms should continue to comply with the CTA absent further developments. (See FinCEN’s current requirements) 
  • NSBA President and CEO Todd McCracken on March 5 stated, “FinCEN should immediately reverse course and suspend enforcement of the CTA for all until these issues are finally resolved.” Appeals of the NASB ruling could take months or years. (BGov, March 5) 

CTA’s Onerous Requirements

Treasury Department's FinCEN logo
  • The CTA amended the Bank Secrecy Act to require corporations, limited liability companies, and similar entities to report certain information about “beneficial owners” who own at least 25% of an entity or indirectly exercise “substantial control” over it. (Roundtable Weekly, Sept. 15, 2023)
  • The CTA authorized the Treasury’s Financial Crimes Enforcement Network (FinCEN) to collect and disclose beneficial ownership information to authorized government authorities and financial institutions. The statute also mandated the submission of regular reports by the end of 2024 that includea litany of sensitive personal identifiers of the owners, senior employees, and/or advisors of covered entities. (FinCEN’s current requirements)   
  • The law directly impacts more than 32 million existing entities and an additional 5 million newly created entities every year. These companies and other legal entities face increased paperwork, privacy risks, and potentially devastating fines and prison terms. (New York Times, March 4)
  • The CTA rules subject many real estate businesses to a heavier compliance burden at a time when the industry faces economic challenges from decreasing office usage and diminishing credit capacity. 

Roundtable Opposition

  • The Roundtable has consistently opposed the beneficial ownership rules. In Nov. 2023, The Roundtable and a broad coalition of approximately 70 business groups urged Congress to pass a one-year delay in implementing the burdensome reporting requirements. (Coalition letter and PoliticoPro, Nov. 16)
  • In Feb. 2022, The Roundtable joined nine other national real estate industry organizations in detailed comments to FinCEN about the negative impact of the proposed beneficial ownership regulations on real estate transactions.  

The Roundtable’s Real Estate Capital Advisory Committee (RECPAC) will continue to monitor developments related to beneficial ownership requirements and legal outcomes.

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SEC Releases Climate Disclosure Rules

Posted on by Abigail Grenadier
SEC logo and text

On March 6, the U.S. Securities and Exchange Commission (SEC) released long-awaited final “Climate Disclosure Rules” that establish federal regulations for registered companies to disclose climate-related financial risks and opportunities. The Real Estate Roundtable has prepared a fact sheet summarizing “What CRE Should Know” about the new SEC rules.

Overview of the SEC Rules

  • The rules require certain registrants to report “material” financial impacts to address storms, wildfires, sea level rise, and other events attributable to climate change (SEC news release, March 6)
  • Certain climate-related expenses and costs must be quantified and disclosed in audited financial statements filed annually as part of Form 10-K.
  • The rules also expand disclosures in narrative “items” included in a 10-K, such as descriptions of “physical” and “transition” risks from extreme weather and related events.
  • The SEC’s final rules impose no requirements to report Scope 3 emissions from sources in a company’s “value chain” – following the position advocated by the Roundtable in 2022 comments. (Roundtable Weekly, June 10, 2022)
  • “The SEC’s decision to drop proposed Scope 3 reporting was the right move,” said Roundtable President and CEO, Jeff DeBoer. “It would have imposed onerous financial and paperwork burdens for commercial real estate owners and failed to produce reliable and useful emission information for investors.”
  • The Climate Disclosure Rules phase-in and ramp-up over time. The largest companies (in terms of the amount of shares held by public investors) must start complying in 2025. (RER Fact Sheet)

Impacts on CRE 

The Roundtable’s Fact Sheet on the SEC’s Climate Disclosure Rules
  • CRE registrants should become familiar with the new rules if they voluntarily set corporate “targets” to reduce emissions in their buildings or portfolios, or own assets located in cities or states with building performance mandates.
  • Companies that purchase renewable energy certificates (RECs) or carbon offsets may also be subject to SEC disclosures.
  • CRE owners and financial firms with “lifecycle” cap ex investment plans for building electrification may also be subject to new reporting.
  • The SEC’s rules do not preempt similar state requirements. For example, companies regulated by California’s climate disclosure laws passed in 2022 must satisfy those rules in addition to SEC rules. (Roundtable summary of the California legislation and Roundtable Weekly, Sept. 22)
  • The courts may ultimately decide the legality of the SEC’s actions. Institutional investors might move the market toward the SEC’s rules even if they are stalled or struck in court.

The Roundtable’s Sustainability Policy Advisory Committee (SPAC) will continue to assess the implications of the SEC’s rules and convene our members to develop industry standards and practices for compliance.

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Fed Chairman Testifies on Regional Bank Loan Concentrations in CRE, Basel III Proposal Changes

Posted on by Abigail Grenadier
Fed Chair Jerome Powell addressed CRE concerns in an exchange with Sen. Catherine Cortez Masto (D-NV)

Federal Reserve Chair Jerome Powell testified before congressional committees this week about the risks posed by commercial real estate loans to regional banks—and that he expects “broad and material changes” to a regulatory proposal to hike bank capital requirements known as “Basel III.” (The Hill, March 7 and Reuters, March 6)

CRE Concerns & Banking

  • The Senate and House hearings focused on the Fed’s March 1 Monetary Policy Report to Congress. The publication stated, “Credit quality at banks remained strong, although the quality of CRE loans backed by office, retail, and multifamily buildings continued its decline, a result of the lower demand for downtown real estate prompted by the shift toward telework.” The report also noted, “Low levels of transactions in the office sector likely indicated that prices had not yet fully reflected the sector’s weaker fundamentals.”
  • During a March 7 Senate Banking Committee hearing, Fed Chair Powell responded to questions from Sen. Catherine Cortez Masto (D-NV) that he expects some smaller banks with high commercial real estate office concentrations will fail, but that risks posed by these loans are “manageable.” (Watch a video clip of the exchange, above)
  • Similar concerns were raised by policymakers with Powell during a March 6 House Financial Services Committee hearing. The Fed chair addressed why he expects manageable bank losses and added, “We’ve had a secular change in the economy, which has left office demand significantly lower, at least temporarily, and perhaps for a long time. The same is true in some downtown retail (properties) associated with office workers. So it’s a shock to the system.”

Basel III Changes

Senate Banking Committee
  • The committees also heard Powell state that the “Basel III” regulatory proposal, which would significantly increase capital requirements for banks with at least $100 billion in assets, is likely to be overhauled after an enormous private sector response. He commented to the Senate panel, “We do hear the concerns and I do expect that there will be broad and material changes to the proposal.” He told House lawmakers that a rewrite of the proposal is a “very plausible option.” (Fortune and GlobeSt, March 7 | Bloomberg and PolitcoPro, March 6)
  • The Real Estate Roundtable raised industry concerns about the negative impact of the Basel III proposal in a Jan. 12 letter to the Fed and other agencies. The comments outlined how the proposal would decrease real estate credit availability, increase borrowing costs for commercial and multifamily real estate properties, and negatively impact the U.S. economy—and urged federal regulators to withdraw their proposed rulemaking.
  • The New York Times DealBook reported this week that Basel III could crimp lending as some banks struggle with office portfolios and a looming “maturity wall” of $1.5 trillion in CRE loans come due over the next two years. (New York Times, Feb. 7)

Industry Views

  • On March 6, Roundtable Board Member Scott Rechler (Chairman and Chief Executive Officer, RXR) told CNBC’s Squawkbox that high interest rates, price discovery, and the amount of maturing CRE loans have resulted in a “slow-moving train wreck” for regional banks.
  • Rechler, a member of the New York Fed’s Board of Directors, said, “There’s a balance. The longer rates stay higher, there’s more distress. For the industry, there’s enough imbalance right now that some level of rates moderating will help ease this transition.  Capital structures are upside down. They’re going to need to be re-equitized, there’s going to be write-offs. So if you can bring down (interest rates), it can create some transaction activity.” (Squawkbox, March 6)
  • Squawkbox also featured Roundtable Member Marty Burger (Infinity Global Real Estate Partners CEO and former Silverstein Properties CEO) on Feb. 28 to discuss office-to-residential conversion opportunities in the current CRE environment. (CNBC, Feb. 28)

Today, RER’s Immediate Past Chair Debra Cafaro (Chairman and Chief Executive Officer, Ventas, Inc.) discussed the CRE market with a focus on the senior housing sector on Bloomberg Markets. “For the commercial real estate sector writ large, those tightening financial conditions are having an impact, particularly in sectors like office, where you have the demand fall off. There will be an impact on the smaller lenders. It is something the system will have to absorb over time with $1 trillion of real estate loans coming due in 2024. It is having an effect. The best elixir for that might be lower rates,” Cafaro said.

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President Biden Proposes New Housing Incentives, Increased Taxes on Wealthy Individuals and Public Corporations

Posted on by Abigail Grenadier

President Joe Biden’s State of the Union address last night included proposals to levy a 25 percent minimum tax on wealthy individuals, increase the corporate tax rate from 21 to 28 percent, and raise the alternative minimum tax on large corporations from 15 to 21 percent. He also called on Congress to pass legislation to support the construction or rehabilitation of more than 2 million homes and rolled out new tax incentives for homebuyers. (Biden’s Remarks | White House Fact Sheets on Taxes and Housing, March 7)

Proposed Tax Increases

  • Biden proposed to levy a 25 percent minimum tax on those with wealth of more than $100 million. He committed to not raising taxes on those making $400,000 or less while heavily criticizing the 2017 Tax Cuts and Jobs Act (TCJA) as a $2 trillion giveaway to high-income households and corporations. (Tax Policy Center | Forbes, March 8)
  • Most of the Biden tax agenda is carried over from his prior budgets and includes provisions that he was unable to pass when Democrats controlled both chambers of Congress. While not detailed in his speech, the White House’s upcoming 2025 budget could include past proposals to raise taxes on real estate like-kind exchanges and carried interest income. (Roundtable Weekly, March 10, 2023)
  • Many provisions from the 2017 tax bill will expire at the end of 2025, including the 20 percent deduction for pass-through business income, the cap on the deductibility of state and local taxes, and the reduction in the top individual tax rate from 39.6 to 37 percent. The approaching expiration of the individual provisions creates a tax “cliff” that is likely to drive tax negotiations next year.

Housing Plan

Real Estate coalition response to President Biden's SOTU housing proposals.
Real estate coalition response to President Biden’s SOTU housing proposals.
  • The White House’s Fact Sheet on housing describes the administration’s plans to establish new tax credits for first-time homebuyers and individuals who sell their starter homes. The tax credit for home sellers seeks to address the “lock-in” effect associated with current high interest rates.The president would also increase spending on affordable housing by Federal Home Loan Banks. (PoliticoPro and White House Fact Sheet on Housing, March 7)
  • The White House Fact Sheet also includes an expansion of the low-income housing tax credit (LIHTC) to support an additional 1.2 million affordable rental units and a new Neighborhood Homes Tax Credit to encourage the construction or preservation of over 400,000 affordable, owner-occupied homes. Bipartisan legislation to expand LIHTC passed the House in January and is pending in the Senate.
  • The National Multifamily Housing Council (NMHC) and nine industry groups responded to the negative aspects of Biden’s housing plan. A coalition letter explained how proposals to limit fee for service arrangements would hurt renters by undermining the administration’s objectives of lowering housing costs, driving new housing development, and creating more affordable rental housing. President Biden has also supported Department of Justice and Federal Trade Commission investigations into rental rate fixing—investigations that many in the industry believe are highly questionable. (NMHC statement and real estate coalition letter, March 7)

Funding Watch

  • After the House passed a spending package this week to fund several federal agencies through September, the Senate has until midnight tonight to pass the bill and avoid a partial government shutdown.
  • Approval from all 100 senators is necessary to fast track the process. The consideration of multiple amendments could delay a final vote until Saturday, necessitating a temporary funding extension to avoid disruption and get the final bill to President Biden for his signature. (The Hill, March 8)

The next government funding deadline is March 22, which requires a new spending package to fund the Pentagon, Health and Human Services, Labor, and other agencies. Policymakers agreed on this two-tiered stopgap funding plan (March 8 and 22) to buy time to negotiate a full-year appropriations bill. (Roundtable Weekly, March 1)

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Senate Republicans Seek Changes to House-Passed Tax Package

Posted on by Abigail Grenadier
Senate Finance Committee Chairman Ron Wyden (D-OR), left, and Ranking Member Mike Crapo (R-ID), right.

The Senate Finance Committee’s top Republican made it clear this week that he wants changes to a House-passed $78 billion tax package, which includes Roundtable-supported measures on business interest deductibility, bonus depreciation, and the low-income housing tax credit (LIHTC). [Roundtable Weekly, Feb. 2 | PoliticoPro and Tax Notes, Feb. 29]

Senate Republicans Concerns

  • The Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) passed the House on Jan. 31 by an overwhelming 357-70 vote. House Ways and Means Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR) are pressing Senators to support its passage. (Axios, Feb. 16)
  • Senate Republicans considering the House tax package have called for an amendment process that could be time consuming. (The Hill, Feb. 2)
  • Finance Committee Ranking Member Mike Crapo (R-ID) laid out the changes he would like to see in the bill in a Feb. 28 news release. A major issue for Sen. Crapo is a reform to the Child Tax Credit (CTC) that allows taxpayers to rely on income from prior years when determining their eligibility for the refundable credit. (Fiscal Times, Feb. 29)
  • Sen. Crapo added in comments to Tax Notes this week that “There’s just a lot of separate issues that need to get sorted out. Everything from traditional extenders to LIHTC to SECURE 2.0.”

Congressional Timing

  • Sen. Crapo also stated in his news release that “… with each week that has passed, (Republican) members have strongly voiced additional calls for numerous modifications, and there are also increasing concerns about making 2023 changes this far into the IRS tax filing season.” The Senator said he is “committed to seeking a bipartisan resolution that a majority of Senate Republicans can support.” (Tax Notes, Feb. 29)
  • Sen. Wyden and senior congressional staff discussed the tax package with Roundtable members during The Roundtable’s all-member 2024 State of the Industry Meeting in Washington. (Roundtable Weekly, Jan. 26)
  • Additionally, The Roundtable and 21 other industry organizations that comprise the Housing Affordability Coalition urged the Senate on Feb. 15 to pass the tax package. The coalition’s letter emphasized the importance of advancing provisions in (H.R. 7024) that strengthen the low-income housing tax credit (LIHTC)—along with various real estate investment measures that would benefit communities and the broader economy. (Coalition letter, Feb. 15)

The best chances for enacting the tax package may be in combination with a government funding bill later in March. (See story above).

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Congress Punts Funding Deadlines … SEC to Vote March 6 on Climate Disclosures … Roundtable Urges EB-5 Guidance Correction

Posted on by Abigail Grenadier

A bill passed by both chambers of Congress yesterday and signed by President Biden today punts a set of government funding deadlines to March 8 and 22, thereby preventing a partial government shutdown that was scheduled to start at midnight. (ABC News, March 1 | House bill text)

New Stopgap Goals

  • The new two-tiered stopgap bill gives policymakers some time to negotiate a full-year appropriations bill as a House-passed tax package is under consideration in the Senate. (See tax story below).
  • On Wednesday, congressional leaders announced the deal, which extends funding for the departments of Housing and Urban Development, Commerce, Energy, Transportation, and others from March 1 through March 8. The bill also extends funding for the Pentagon, Health and Human Services, Labor, and other agencies from March 8 through March 22.

SEC to Vote March 6 on Climate Rule

  • The U.S. Securities and Exchange Commission (SEC) announced a vote next week on whether it will adopt final rules requiring companies to provide certain climate-related information in their registration statements and annual reports.
  • The SEC’s “open meeting” to consider the climate rule will take place on Wednesday, March 6 at 9:45 am and will be webcast at www.sec.gov.

Roundtable Urges Congress to Correct EB-5 Guidance

  • The Real Estate Roundtable urged the leaders of the Senate and House Judiciary Committees this week to correct defective “guidance” enacted by the U.S. Citizenship and Immigration Services (USCIS) that is undermining the EB-5 Reform and Integrity Act of 2022 (RIA). [Roundtable EB-5 letter, Feb. 28, 2024]
  • The USCIS’s arbitrary guidance states that EB-5 investments made after RIA’s enactment must “remain invested for at least two years.” This position contradicts regulations kept by USCIS on its rulebooks for decades.
  • RER’s letter also explains that USCIS’s defective guidance exacerbates CRE’s current liquidity issues. For example, the agency’s position effectively eliminates the availability of EB-5 investment capital to help finance projects to convert underutilized commercial buildings to multifamily housing.  

The Roundtable is calling on Congress to correct the error with a short statutory change that codifies the long-standing regulatory approach, which couples the periods for EB-5 capital sustainment and conditional residency.

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Real Estate Roundtable Leaders Discuss Market Conditions, Policy Issues Facing CRE

Posted on by Abigail Grenadier
Real Estate Roundtable Chair John Fish (Chairman & CEO, Suffolk)
Real Estate Roundtable Chair John Fish (Chairman & CEO, Suffolk) on Bloomberg’s Wall Street Week.

This week, Real Estate Roundtable Chair John Fish (Chairman & CEO, Suffolk) and Roundtable President and CEO Jeffrey DeBoer discussed market conditions and policy issues impacting commercial real estate with Bloomberg’s Wall Street Week and the American College of Real Estate Lawyers (ACREL).

Markets and Federal Actions

  • Roundtable Chair John Fish addressed how current economic challenges facing commercial real estate, cities, communities, businesses and individuals have led to a somewhat “somber” mood in his Feb. 26 Wall Street Week interview.
  • Fish emphasized the importance of CRE to the overall economy and the need for policymakers to work with the industry to ensure a soft landing. He also discussed the wave of maturing CRE debt coming due at higher interest rates as remote-work continues to press the industry—and the ramifications of a large number of environmental regulations moving forward in a compressed time period.
  • The Roundtable’s chair noted, “Back in June of 2023, the Federal Reserve, the FDIC in the OCC issued forward guidance on working with borrowers, and that was credit worthy borrowers. I would encourage them to continue with their policy and reinforce that policy. It’s extremely important to the industry as a whole because creditworthy borrowers should not get hurt through this process.” (Roundtable Weekly, June 30, 2023)
  • He added, “We need the Federal government to work with us on interest rates. We also need the federal government to ask workers to come back to work. That’s one of the reasons why some of our buildings in downtown urban areas are 25, 30 percent vacant today. As an industry, we need to work together, collaborating with the government to try to solve these problems.” (Bloomberg’s Wall Street Week)

The Roundtable’s Policy Role

Roundtable President and CEO Jeffrey DeBoer, right, with Jay Epstein, former president of the American College of Real Estate Lawyers, left.
  • Roundtable President and CEO Jeffrey DeBoer spoke with Jay Epstein, former president of the American College of Real Estate Lawyers on the Feb. 26 edition of the ACREL Files podcast about The Roundtable’s policy advocacy role in Washington and compelling issues now facing the industry. 
  • DeBoer explained that The Roundtable is a unifier between industry and lawmakers on policies that benefit the economy and communities by using a non-partisan, data-centric, asset-based approach.
  • DeBoer also said the industry is at an inflection point as issues—including post-pandemic remote work and CRE needs, office-to-residential property conversions, affordable housing, building energy usage, insurance costs, and xenophobic attitudes to foreign real estate ownership—are “all rushing forward on top of the market challenges.” (ACREL Files podcast)

“By and large, the industry has stepped up to challenges, met them, and helped the economy and the country move forward.” He added, “Today there are other problems with financing and remote work, but I have no doubt the industry will overcome those challenges and emerge stronger.”

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Despite Ongoing Market Challenges, Industry Leaders Expect Improvements in 2024

Posted on by Abigail Grenadier
Real Estate Roundtable President and CEO Jeffrey DeBoer
Real Estate Roundtable President and CEO Jeffrey DeBoer

The Real Estate Roundtable’s Q1 2024 Sentiment Index confirms that commercial real estate property markets continue to experience significant challenges. At the same time, in the coming year industry executives expect monetary policy action reflecting lower inflation to bring greater stability in asset pricing and expanded availability of debt and equity capital. 

Cautious Optimism

  • Roundtable President and CEO Jeffrey DeBoer said, “Our current Sentiment Index shows improved optimism by industry leaders, compared with previous surveys that highlighted significant market concerns. The Q1 sentiment continues to note challenges presented by ongoing tight capital markets, increased operating expenses, and the continuing uncertainty of post-pandemic, in-office work. However, as the interest rate environment appears to have settled somewhat, executives are now expressing increased optimism that values and capital availability will improve in 2024.”

  • He added, “As we look at the current and future landscape of commercial real estate, it’s clear that we are at a pivotal moment. With nearly $3 trillion of commercial real estate loans maturing in the next four years, it remains very crucial that lenders continue to work constructively with borrowers to reflect both current and expected economic growth. Markets and asset values continue to adjust and stabilize as office use, interest rates, and inflation begin to normalize.”

  • All indices of The Roundtable’s Q1 Index are up, compared to the previous quarter and one year ago. The Index—a measure of senior executives’ confidence and expectations about the commercial real estate market environment—is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices.­­­­ Any score over 50 is viewed as positive. ­­­­

Topline Findings

The Real Estate Roundtable's Q1 2024 Sentiment Index
  • The Q1 2024 Real Estate Roundtable Sentiment Index registered an overall score of 61, an increase of 17 points from the previous quarter. The Current Index registered 53, a 21-point increase over Q4 2023, and the Future Index posted a score of 70 points, an increase of 13 points from the previous quarter. These increases point to cautious optimism in the real estate market.
  • There continue to be variations among asset classes and within specific property types as the real estate market rapidly changes. Industrial and multifamily are starting to soften, but retail and hospitality asset classes were identified as being surprisingly resilient. While many office properties have experienced a significant erosion in value, Class A offices continue to outperform.
  • An overwhelming 79% of survey participants indicate that asset values have decreased compared to the previous year. However, the potential end to interest rate hikes has instilled some industry optimism, with nearly 80% of survey participants expecting asset values to be the same or higher a year from now.
  • Survey participants continue to emphasize the challenging capital markets landscape, with 86% and 85% of survey participants suggesting that the availability of equity and debt capital, respectively, is the same or worse than a year ago. That said, 67% and 76% believe the availability of equity and debt capital, respectively, will improve a year from now. 

Data for the Q1 survey was gathered in January. See the full Q1 report.

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Government Shutdown Looms … Coalition Supports YIMBY Bill … SEC Scope 3 Emissions Rule

Posted on by Abigail Grenadier

Congress returns next week to address an imminent government shutdown. Unless the House and Senate pass a long-term budget or short-term stopgap by March 1, 20 percent of funding for the current fiscal year will expire – with remaining federal operations potentially ceasing on March 8.  (Forbes | (Politico, Feb. 21)

Funding Negotiations

  • Policy riders on issues such as abortion, gender-affirming care, and medical research remain contentious issues.
  • Axios reported this week that House Republicans expect some version of a shutdown before passing a new funding bill. Congress has approved three continuing resolutions since Sept. 30 to keep the government open with current funding in place, as a full budget for the fiscal year ending Sept. 30 remains elusive. (Committee for a Responsible Budget, Feb. 13)
  • Congress must also take into account a key date of April 30, when a 1 percent cut in all federal funding (including Pentagon programs) will take effect without passage of fiscal legislation. (Federal News Network, Dec. 26, 2023)

Pending Tax Package

House Ways and Means Committee Chair Jason Smith [R-MO]
  • A bipartisan $79 billion tax package that was overwhelmingly approved by the House on Jan. 31faces potential hurdles in the Senate. The bill contains Roundtable-supported measures on business interest deductibility, bonus depreciation, and the low-income housing tax credit (LIHTC). (Roundtable Weekly, Feb. 2 and Jan. 19)
  • Leading congressional tax writers are considering adding the House-passed tax package to a potential spending bill. House Ways and Means Committee Chair Jason Smith [R-MO] recently told Axios that he is meeting with Republican senators to pass the limited tax extenders package as a prelude to next year’s effort on whether to extend tax cuts passed in 2017 as part of the Tax Cuts and Jobs Act. (TaxNotes Talk podcast, Feb. 21)
  • Smith commented, “For one it breaks the dam. There has not been any kind of even a small extenders package passed in three years and let alone in divided government. And so 2025 is the Super Bowl of tax.” (Axios, Feb. 16)

“Yes in My Backyard” Coalition

The Yes In My Backyard (YIMBY) Act -- H.R. 3507
  • This week, The Real Estate Roundtable and 21 other national organizations expressed their strong support for the bipartisan Yes in My Backyard Act (YIMBY) in their latest letter to the House Financial Services Committee (Coalition letter, Feb. 20)
  • H.R. 3057, introduced by Congressmen Mike Flood (R-NE) and Derek Kilmer (D-WA), would help promote development of affordable housing by requiring local governments that receive certain federal grants to report on their practices to support high-density development.
  • Separately, the Wall Street Journal (Feb. 20) highlighted that community opposition to new projects is not just restricted to housing developments. E-Commerce hubs are also “increasingly contending with a headache” of NIMBY sentiments, as developers of warehouse and logistics properties face the conundrum of siting projects that are necessary to deliver goods to residents and consumers.     

SEC & Scope 3 Disclosure

The SEC must still vote on the final regulation before its release. Progressive Democrats in Congress will likely object to any rule that relieves registered companies from Scope 3 reporting.

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