Author: Trey Jackson

Biden Administration Expands Low-Income Housing Financing and Provides More Flexibility to Affordable Housing Developers

Posted on by Trey Jackson

Housing construction

The Biden administration on Oct. 7 announced several new federal agency actions aimed at closing the housing supply shortfall as part of its Housing Supply Action Plan, launched in May. (White House statement, Oct. 7 | Multi-Housing News, Oct. 10 | Roundtable Weekly, May 20)

LIHTC Reform

The White House’s announcement focused on efforts to reduce barriers to affordable housing construction and preservation by:

  • Finalizing Treasury rules that reform the Low-Income Housing Tax Credit (LIHTC) income guidelines. The new rules provide greater flexibility to develop mixed-income housing, housing for very low-income tenants, and housing in sparsely populated rural areas. Specifically, the final regulations create an alternative means of complying with the rent restriction requirements of the LIHTC. The new rules allow owners to measure and average their tenants’ income based on a broader range of qualifying incomes (20 to 80 percent of the area median). 
  • Extending LIHTC deadlines to ensure that affordable housing projects delayed by public health, economic, and supply-chain issues can be built as expeditiously as possible and still qualify for the credit. (IRS Notice 2022-52)
  • The Real Estate Roundtable has long supported well-designed, targeted tax incentives like the LIHTC that are aimed at boosting the construction and rehabilitation of badly needed affordable and workforce housing. (Roundtable 2022 Policy Agenda Tax Section)

Other Federal Actions Announced by the White House

Construction of affordable housing

  • Reforming and streamlining Fannie Mae’s and Freddie Mac’s Forward Commitment programs, which allow developers to secure financing to pay off a construction loan when construction has been completed and the housing project has been approved for occupancy. Each GSE will be able to provide $3 billion in Forward Commitments per year—above and beyond the multifamily purchase cap.
  • Enabling more affordable housing development and preservation with State and Local Fiscal Recovery Funds (SLFRF) under the American Rescue Plan. Treasury and the Department of Housing and Urban Development jointly published a “How-To” Guide to further encourage state and local governments to make use of these funds with other sources of federal funding.
  • Promoting more housing options near transit and other modes of transportation, coordination of transportation and housing planning, and rewarding jurisdictions that have removed barriers to housing development.
  • Increasing transportation investments that can connect and expand affordable housing supply. The Department of Transportation (DOT) has begun awarding grants for recipients where local governments are improving their transportation infrastructure and promoting a range of transportation, environmental, urban planning, and housing policy goals.
  • DOT also announced “TIFIA 49,” which authorizes borrowing from the Transportation Infrastructure Finance and Innovation Act (TIFIA) program up to 49 percent of eligible costs for projects that meet eligibility requirements, an increase from 33 percent of eligible project costs.

Real Estate Views

Willy Walker on SquawkBox

  • The National Multifamily Housing Council and National Apartment Association applauded the Biden administration’s plan. Their joint statement noted the U.S. needs to produce 4.3 million more apartments by 2035 to keep up with demand.
  • Roundtable Member Willy Walker, above left, chairman and CEO of Walker and Dunlop, joined CNBC’s Squawk on the Street on Oct. 12 to discuss supply and demand challenges in the housing market, rent increases associated with inflation, and the consequence of banks pulling back loans from commercial real estate. (Watch video) 

The Real Estate Roundtable’s Research Committee and Real Estate Capital Policy Advisory Committee (RECPAC) has formed an Affordable Housing Working Group, which is working on a report to address expansion of the nation’s housing infrastructure.  

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Real Estate Industry Urges Lawmakers to Consider Tax Incentive for Property Conversions

Posted on by Trey Jackson
CRE with green trees

A Roundtable-led coalition of 16 national real estate organizations on Oct. 12 recommended certain enhancements and expansions to the Revitalizing Downtowns Act (S. 2511, H.R. 4759). The bill was introduced by Sen. Debbie Stabenow (D-MI) and Rep. Jimmy Gomez (D-CA) to encourage the conversion of older buildings into new uses. (Coalition letter) 

Qualified Property Conversions Credit 

  • The coalition noted that many buildings are being reimagined and repurposed to address a severe shortage of housing and meet other post-pandemic business needs. Where appropriate, property conversions can be a cost-effective means to develop new housing supply, create jobs, and generate critical sources of local property tax revenue while saving energy and reinvigorating communities.

  • The Revitalizing Downtowns Act would provide a 20 percent tax credit for qualified property conversion expenditures. The credit is modeled on the historic rehabilitation tax credit and could be used for office buildings that are at least 25 years old at the time of the conversion.

  • An office-to-residential conversion project may qualify for the credit if the project provides at least 20 percent affordable housing—or is subject to an alternative affordable housing arrangement under state or local policy, ordinance, or agreement. 

Real Estate Industry Recommendations 

Denver

  • The recommendations include:
    • (a) expanding the category of properties eligible for the credit to include other types of commercial buildings, such as shopping centers and hotels;
    • (b) extending the incentive to real estate investment trusts (REITs); and
    • (c) reducing the conversion expenditure requirement from 100 percent of the building’s basis to 50 percent—along with half-a-dozen other suggestions.

  • The coalition letter is the work product of a property conversions working group created by The Real Estate Roundtable’s Tax Policy Advisory Committee. The working group has reviewed and considered the challenges and impediments confronting potential property conversion activities.  

Recent media articles on property conversions include “Cities push to convert deserted office buildings into housing” (Axios, Sept.  28) and “Multifamily Developers Turn Some Dead Office Space into Apartments” (WealthManagement.com, Oct. 4). 

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FASB Approves Two-Year Extension for Transitioning LIBOR Contracts to Alternative Benchmark

Posted on by Trey Jackson

FASB-log-horizontall-450w

The Financial Accounting Standards Board (FASB) recently voted to extend accounting relief to companies working to transition financial contracts from the London Interbank Offered Rate (LIBOR) benchmark to an alternative benchmark such as the Secured Overnight Financing Rate (SOFR). (Wall Street Journal, Oct. 5) 

Transition Timing 

  • LIBOR was the dominant reference rate used in recent decades for financial contracts—including commercial real estate debt, mortgages, student loans and derivatives—worth an estimated $223 trillion. (Roundtable Weekly, Dec. 10, 2021.
  • The FASB relief allows companies until the end of 2024 to update or renegotiate Libor-backed loans. Companies that change the reference rate—as opposed to a more substantive alteration such as extending the loan’s maturity—will not be required to record a new loan. (UHY, Oct. 6)
  • The two-year, optional extension from Dec. 31, 2022 to Dec. 31, 2024 aims to help banks and borrowers transition LIBOR-based loans—including legacy “tough legacy” contracts.
  • Banks can continue using LIBOR in U.S. dollars and other currencies on existing loan contracts through June 2023. U.S. banks stopped issuing new financial contracts using LIBOR at the end of last year. (Wall Street Journal, June 7)

LIBOR to SOFR

Libor transition to SOFR image

  • The Federal Reserve and other regulators prefer banks and borrowers use the alternative benchmark SOFR. Companies are considering using two versions: overnight SOFR, administered by the Federal Reserve Bank of New York—and term SOFR, which benefits companies that borrow or lend in one-, three- or six-month periods. (NYS Society of CPAs, Oct. 6)
  • The Wall Street Journal reported that federal regulators prefer a version of SOFR because of its stability, as opposed to credit-sensitive alternatives such as the Bloomberg Short Term Bank Yield Index.

Legislative Support

  • Separately, Congress passed the Adjustable Interest Rate (LIBOR) Act (H.R. 4616) in March to provide for an orderly transition of debt contracts away from LIBOR, as part of an “omnibus” bill to fund the government. (Roundtable Weekly, March 11)
  • The Real Estate Roundtable and 17 national trade groups submitted letters in 2021 on April 14 and July 27 to policymakers in support of measures to address “tough legacy” LIBOR-based contract issues. (Roundtable Weekly, Dec. 10, 2021) 

The LIBOR transition will be among the issues for discussion during The Roundtable’s Real Estate Capital Policy Advisory Committee’s (RECPAC) next meeting on Nov. 2 in New York City. 

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Hurricane Ian Raises Issues on Natural Catastrophe Risk and Reform of National Flood Insurance Program

Posted on by Trey Jackson

Hurricane Ian aftermath

The catastrophic damage revealed this week in the wake of Hurricane Ian shows the need for Congress to address natural catastrophe risk and pass a long-term reauthorization of the National Flood Insurance Program (NFIP). The Real Estate Roundtable has long advocated for a long-term program extension to avoid lapses that create uncertainty in both the insurance and housing markets.

NFIP & CRE

  • Originally enacted in 1968, the NFIP has been extended under 22 short-term congressional reauthorizations, including last week’s stopgap funding bill that extended government operations until Dec. 16. (Congressional Research Service report, Oct. 3 and Roundtable Weekly, Sept. 30)
  • The total potential debt exposure to properties in the path of Ian could be as high as $52 billion. (Trepp, Sept. 29 “Hurricane Ian Makes Landfall: Mapping the Commercial Real Estate Exposure”)
  • Recovery from storms could take longer and cost more to rebuild amid continued supply chain constraints and inflationary pressures. Media coverage included:
    • “Property Damage from Hurricane Ian Now Estimated Between $41 Billion to $70 Billion” (WorldPropertyJournal, Oct. 7)
    • “The Impact Hurricane Ian Could Have on CRE” (GlobeSt, Oct. 3)
    • “’Never Seen Anything Like This’: CRE Assesses Impact Of Hurricane Ian” (BisNow, Oct. 2)
    • “Ian will ‘financially ruin’ homeowners and insurers” (PolitcoPro, Oct. 1)

The Roundtable continues to work with lawmakers and coalition partners to address catastrophic risk issues and enact a long-term extension to the NFIP that includes effective reforms.

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Treasury and CISA Seek Comments on Potential National Cyber Insurance Program

Posted on by Trey Jackson

CISA LogoAs cyberattacks pose an increasing threat to the real estate industry and the U.S. economy, the government is seeking input from policyholders, critical infrastructure owners, and operators on a potential federal response for catastrophic cyber incidents, including whether a national cyber reinsurance program is warranted. (Treasury Department Notice, Sept. 29 and NextGov, Sept. 28)

Response to Catastrophic Cyber Attacks

Terrorism & Cybersecurity

CIAT logo

  • The Roundtable and its partners in the Coalition to Insure Against Terrorism (CIAT) have raised concerns about the need for effective insurance products to help manage the risks of catastrophic cyberattacks. (CIAT comment letter on the 2022 Report on the Effectiveness of the Terrorism Risk Insurance, May 16)
  • Insurers and the federal government’s Terrorism Risk Insurance Program (TRIP) may not cover the expanding range of such losses. For example, TRIP may only cover cyberattacks if they can be considered “terrorism” under its defined program criteria. (Roundtable Weekly, June 24)
  • Separately, CISA is requesting input on the implementation of cyber incident reporting requirements (due Nov. 14). CISA is also hosting a series of public listening sessions in cities throughout the nation as an additional means of gathering stakeholder responses on definitions for the proposed rules, the form and content of reports, enforcement procedures, and information protection policies. (Federal Register and Notice of Public Listening Sessions, Sept. 12)

Cybersecurity has long been a focus of The Roundtable’s Homeland Security Task Force (HSTF) and the Real Estate Information Sharing and Analysis Center. Cybersecurity issues and CRE will be discussed during the next HSTF meeting on Jan. 25, 2023—held in conjunction with The Roundtable’s State of the Industry meeting. (Roundtable Meeting Calendar)

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Treasury Requests Public Input on Inflation Reduction Act Energy Tax Incentives

Posted on by Trey Jackson

U.S. Treasury DepartmentThe Treasury Department and Internal Revenue Service (IRS) issued six separate notices this week to gather public input regarding the clean energy tax credits and deductions in the Inflation Reduction Act (IRA). (Treasury Fact Sheet, Oct. 4 and Roundtable Weekly, Sept. 30)

CRE Impact

  • The Treasury and IRS notices most relevant to the real estate industry concern the new law’s provisions regarding:
    • Incentives to improve energy efficiency such as the tax deduction for commercial buildings (Section 179D) and the credit for single- and multi-family residential construction (Section 45L);
    • Credits for specific clean energy technologies like solar panels, energy storage, combined heat and power systems, dynamic glass, and grid interconnection property (Section 48);
    • Credit monetization which can allow businesses to transfer the amount of certain credits to third parties; and
    • Enhancements to boost the value of certain credits where projects are located in economically distressed areas, or that meet labor requirements for prevailing wages and apprenticeship hiring.
  • Comments are due to the Treasury and IRS by November 4.

  • Roundtable fact sheets detail the IRA’s Clean Energy Tax Incentives (Sept. 20) and Revenue Provisions (Aug. 17).

Rapid Implementation

Bloomberg Center energy efficiency canopy

  • Congress authorized $270 billion to the IRA’s clean energy tax incentives – putting Treasury and the IRS, in coordination with the Energy Department and the Environmental Protection Agency, at the forefront of implementation. (E&E Greenwire, Oct. 5 and Roundtable Weekly, Aug. 12)
  • One of Treasury’s guiding principles for the public comment process is to “provide clarity and certainty” for businesses and other taxpayers to access the incentives, “so the climate and economic benefits can take effect as quickly as possible.” (Treasury Fact Sheet)

  • White House Senior Adviser John Podesta said, “We have to get implementation right. That means we have to listen, engage, and move quickly to translate policy into action.” (Reuters and Bloomberg Law, Oct. 5)

The Roundtable, working through its Sustainability and Tax Policy Advisory Committees (SPAC and TPAC), will coordinate with industry partners to develop comments to the Treasury and IRS notices that highlight CRE clean energy priorities.

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Yellen, House Committee Promote Inflation Reduction Act Climate Investments; CRE Webinars Focus on New Tax Incentives

Posted on by Trey Jackson

Incentives in the Inflation Reduction Act (IRA) will accelerate private sector investment in clean energy technologies, according to remarks this week from Treasury Secretary Janet Yellen, above. (Yellen’s remarks, Sept. 27) 

  • Yellen announced that Treasury will host “a series of roundtable discussions to help inform our efficient and effective implementation of the tax credits.” (Barron’s and AFP News, Sept. 27)
     
  • A House Committee yesterday considered how the IRA’s climate investments will lower families’ utility bills, create jobs, and expand U.S. manufacturing of green tech and electric vehicles. (Video of Congressional hearing)

  • Several of the IRA’s revisions to the federal tax code can help the U.S. real estate sector reduce GHG emissions. Roundtable fact sheets detail the IRA’s Clean Energy Tax Incentives (Sept. 20) and Revenue Provisions (Aug. 17)

Industry Education on the IRA

Duane Desiderio, Tony Malkin, and Ryan McCormick
  • Roundtable Senior Vice Presidents Ryan McCormick (tax counsel), right, and Duane Desiderio, left, (energy counsel) recently participated in a number of panel discussions on how the IRA’s tax credits and deductions can spur energy efficiency and renewable energy projects in buildings. (Roundtable’s IRA fact sheet)
     
  • McCormick participated in a Sept. 27 Engineered Tax Services webinar. (Powerpoint slides) 
  • Desiderio participated in a Sept. 27 CBRE podcast moderated by Co-Chair of The Roundtable’s Research Committee, Spencer Levy (Senior Economic Advisor, CBRE) (Podcast transcript).
  • Desiderio also participated in a Sept. 28 briefing hosted by the Urban Land Institute (ULI) featuring members of The Roundtable’s Sustainability Policy Advisory Committee (SPAC)­­ – Immediate Past Vice Chair Dan Egan (Managing Director, Real Estate ESG – Americas, Blackstone), Suzanne Fallender (VP Global ESG, Prologis), and ULI EVP Billy Grayson.

The Treasury Department is expected to issue multiple regulations and guidance documents in the coming months to implement the new law. The Roundtable plans to submit comments as the new rules are proposed to help accelerate industry investments in tackling the climate crisis. 

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Treasury Issues Final Rule Requiring Disclosure of “Beneficial Owners”

Posted on by Trey Jackson
FinCEN logo

The Treasury Department issued a final rule yesterday that will require millions of companies to report information about their “beneficial owners”—persons who own at least 25% of a company or exert significant authority over it—to the Financial Crimes Enforcement Network (FinCEN). (Final Rule | Fact Sheet | Wall Street Journal and Bloomberg Law, Sept. 29) 

Who Reports? 

  • Treasury Secretary Janet Yellen said, “This rule … will help strengthen our national security by making it more difficult for oligarchs, terrorists, and other global threats to use complex legal structures to launder money, traffic humans and drugs, and commit other crimes that threaten harm to the American people.” (Treasury statement, Sept. 29)
  • The rule will require most corporations, limited liability companies, and other entities created in or registered to do business in the United States to disclose beneficial ownership information.
  • FinCEN notes that the definition of reporting company applies only to legal entities that have 20 or fewer employees and less than $5 million in gross receipts or sales as reflected in the previous year’s federal tax returns. These entities also must not otherwise benefit from the exemptions described in the regulations.
  • Reporting companies created or registered before Jan. 1, 2024, will have one year (until Jan. 1, 2025) to file their initial reports. Those entities created or registered after Jan. 1, 2024, will have 30 days to file their initial reports.

Data Required

FINCEN website
  • The required data about individuals who own, control or create firms will include the name, birthdate, address, and a unique identification number from driver’s licenses or passports—as well as images of the documents. (AP, Sept. 29)
  • Treasury states the database will be available only to law enforcement and government agencies under the CTA’s beneficial ownership information reporting provisions. (Treasury Department, “Beneficial Ownership Information Reporting”) 

Roundtable Concerns 

RECPAC meeting Annual 2022
  • The Real Estate Roundtable submitted comments with other industry organizations earlier this year about CTA’s anti-money laundering regulations affecting real estate transactions. (Industry comment letter and Roundtable Weekly, Feb. 25 | (Coalition letter to FINCEN, Feb. 4)
  • The Roundtable and three other national real estate organizations submitted detailed comments to FinCEN on May 5, 2021 addressing several implementation concerns related to the beneficial ownership registry. (Roundtable Weekly, May 7)
  • Separately, a broad business coalition that includes The Real Estate Roundtable submitted comments yesterday to congressional leaders in opposition to the Establishing New Authorities for Business Laundering and Enabling Risks to Security (ENABLERS) Act.
     
  • The ENABLERS Act would dramatically expand CTA reporting requirements and subject the owners, board members, and senior executives of most businesses and charities to audits. (Coalition letter, Sept. 29) 

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to work with industry partners to address the implications of FinCEN’s 330-page rule and the impact it could have on capital formation and the commercial real estate industry. RECPAC meets on Nov. 2 in New York City. 

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Congress Passes Funding Extension Through Dec. 16, Lame Duck Session Awaits

Posted on by Trey Jackson

US Capitol at dusk

A stopgap funding bill that will keep the government open through mid-December passed the Senate yesterday, the House today, and is expected to receive President Biden’s signature tonight. (Bill text and summary) 

CR Buys Time 

  • The “continuing resolution” (CR) passed Congress after an energy permitting measure sponsored by Sen. Joe Manchin (D-WV) was removed earlier in the week. (Business Insider, Sept. 27)
  • The funding bill will keep federal agencies operating through Dec. 16, buying time for lawmakers during the upcoming lame duck session to craft a possible FY2023 “omnibus” budget package by year-end.
  • The CR includes reauthorization of the National Flood Insurance Program (NFIP), which has been extended more than 20 times. Bloomberg reported that House Financial Services Chair Maxine Waters (D-CA) wants a longer-term NFIP extension and other program changes. “It has to be bipartisan. We are working on keeping the premiums down, and some of the other issues that have been brought to our attention,” she said. 

Lame Duck Awaits

Congress in session

  • After the November election and before the new Congress is seated in January, current members of Congress will return for a “lame duck” legislative session. In addition to addressing outstanding legislative issues, lawmakers will meet with newly elected members, organize their respective party conferences, vote on leadership and committee positions, and discuss their post-election policy agendas.
  • On Thursday, Senate Leader Chuck Schumer announced the Senate would not return until Nov. 14. (The Hill, Sept. 29)
  • The House is scheduled to return from recess on Nov. 9, after the midterm elections.
  • Legislative issues that will vie for attention in the lame duck session include federal appropriations, reauthorization of defense programs, and expiring tax provisions affecting real estate such as certain temporary expansions of the low-income housing tax credit.
  • The elections, tax policy, inflation and other policy issues were among the topics discussed by industry leaders and national lawmakers last week during the Fall Roundtable meeting in Washington. (Roundtable Weekly, Sept. 23).

Next on The Roundtable’s calendar is the Real Estate Capital Policy Advisory Committee (RECPAC) meeting on Nov. 2 in New York City.  

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Congressional and CRE Leaders Discuss Economic, Political Currents Leading to November’s Midterms

Posted on by Trey Jackson

Fall Roundtable Meeting - wide shot

Industry leaders and national policymakers met this week for The Roundtable’s fall meeting to discuss the U.S. political and economic environment, including issues such as inflation, housing, labor shortages, climate change, and November’s midterm elections. (Roundtable Executive Policy Summary and Policy Issue Profiles)

National Policy Issues & CRE

Speakers at The Roundtable’s Sept. 20-21 meeting included:

Real Estate Roundtable Chair John Fish (SUFFOLK)

  • Roundtable Chair John Fish (Chairman & CEO, SUFFOLK), above, and President and CEO Jeffrey DeBoer opened the meeting with an overview of The Roundtable’s efforts to shape the Inflation Reduction Act (IRA) that passed last month, and how the new law’s tax and sustainability provisions impact CRE. (Watch John Fish’s opening remarks | Roundtable Weekly, Aug. 12)

Senate Majority Leader Chuck Schumer (D-NY)

  • Senate Majority Leader Chuck Schumer (D-NY) also discussed the IRA and a string of other recent legislation—including bipartisan success on infrastructure spending, investments in U.S. manufacturing, and overhaul of the EB-5 investment program. He also raised the importance of immigration reform and Congress’s current focus to pass a funding resolution by Sept. 30 to avoid a government shutdown.

Rep. Patrick McHenry (R-NC) and Roundtable Board Member Ross Perot, Jr. (Chairman, Hillwood)

  • Rep. Patrick McHenry (R-NC), left, Ranking Member of the House Financial Services Committee, and Roundtable Board Member Ross Perot, Jr., right, (Chairman, Hillwood), discussed affordable housing supply problems, steps to counter local NIMBY opposition, and the need to develop a prudent economic policy response to prepare for future pandemic risks.

Sen. Mark Warner (D-VA), Roundtable Willy Walker (Chairman & CEO, Walker & Dunlop), and Sen. Michael Bennet (D-CO)

  • Sens. Michael Bennet (D-CO), right, and Mark Warner (D-VA), left, joined Willy Walker, center, (Chairman & CEO, Walker & Dunlop), to discuss supply chain issues, the war in Ukraine, and the importance of GSE reform.

Clean Energy

RER's Duane Desiderio, Tony Malkin and Ryan McCormick

Economic Conditions & Political Landscape

Debra Cafero and Dr. Austan Goolsbee

  • Dr. Austan Goolsbee, right, (former Chairman, White House Council of Economic Advisors) and The Roundtable’s Immediate Past Chair Debra Cafaro (Chairman & CEO, Ventas, Inc.) focused on inflationary pressures, labor shortages, return-to-office issues, and a new era of deglobalization.

Barry Jackson and Jim Messina

  • A “fireside chat” with Jim Messina, right, (former President Obama’s Deputy Chief of Staff) and Barry Jackson, left, (former House Speaker John Boehner’s Chief of Staff) offered an overview of the current state of U.S. politics and a preview of the upcoming midterm elections.

Next on The Roundtable’s meeting calendar is the all-member State of the Industry Meeting on Jan. 24-25, 2023 in Washington, where The Roundtable will unveil its 2023 Policy Agenda.

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