Author: Trey Jackson

Industry and Business Coalitions Raise Concerns About Unintended Negative Consequences of Beneficial Ownership Legislation

Posted on by Trey Jackson

As Congress strives to address the challenges of controlling the use of shell companies engaged in money laundering, tax evasion and terrorism financing, a number of legislative proposals are being considered that could impair capital formation and threaten important privacy protections for real estate.  In two recent comment letters (Nov. 6 industry coalition letter and a Nov. 13 broad business coalition letter), The Roundtable and other organizations detail their concerns about the measures. 

  • As stated in the Nov. 6 industry letter to the Senate Banking Committee, “While well-intentioned, we believe the proposals currently under consideration that are designed to increase the transparency of the ownership structure of limited liability companies (LLCs) and real estate transactions would have negative, unintended consequences on the broader real estate market.  Several of these bills would place a significant compliance burden on owners of small businesses classified as corporations and LLCs, subject these businesses to potentially harmful privacy breaches and expose them to excessive and punitive damages.”
  • The letter also states, “While we support efforts to eliminate terrorism financing and money laundering, we remain concerned about the cost of imposing additional beneficial ownership reporting requirements on real estate partnerships and the extent to which these provisions could impair capital formation, threaten important privacy protections and increase compliance burden.”
  • The four specific legislative measures under consideration in the House and Senate are:

* On Oct. 22, the House passed the Corporate Transparency Act of 2019 (H.R. 2513) – introduced by Reps. Carolyn Maloney (D-NY) and Peter King (R-NY) – that would shift FinCEN reporting requirements from banks to the business community, requiring every business with fewer than 20 employees to register their beneficial owners.

* Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings, Illicit Cash Act (S. 2563)

* True Incorporation Transparence for Law Enforcement, TITLE Act, (S. 1889)

* Corporate Transparency Act (S. 1978)  

  • The Financial Crimes Enforcement Network’s (FinCEN) Customer Due Diligence (CDD) rule became applicable on May 11, 2018. The CDD rule requires financial institutions to collect the beneficial ownership information of business customers when they open accounts.  The congressional proposals would attempt to shift the reporting requirements from large banks – those best equipped to handle reporting requirements – to millions of small businesses – those least equipped to handle reporting requirements.
  • A coalition, including The Roundtable, sent a letter June 10 to the committee’s leadership opposing the Maloney-King bill.  “This legislation would impose burdensome, duplicative reporting burdens on approximately 4.9 million small businesses in the United States and threatens the privacy of law abiding, legitimate small business owners,” the letter states.
  • In the Nov. 6 letter from six real estate organizations, concerns about several of the four bills address:

* Unreasonable Lookback Reporting

* Duplicative Reporting

* Unclear Guidance

* Access and Disclosure Raises Privacy Concern

* Notification and Process for Compliance Untested

* Severe and Punitive Penalties

  • In the Nov. 13 letter, the broader business coalition expresses strong opposition to Title IV of S. 2563 – the Senate’s Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act – introduced in June by Sens. Mark Warner (D-VA), Tom Cotton (R-AR), Doug Jones (D-AL) and Mike Rounds (R-SD).  (Homeland Preparedness News, June 12).
  • The Nov. 13 letter states, “Under this legislation, millions of small businesses would be required to register personally identifiable information with FinCEN, file updated reports within 90 days of any ownership changes, and file additional updated reports within a year of any ownership information changes, such as an expiration of a passport number or a change in address. Failure to comply with these reporting requirements could result in civil penalties of $500 per day up to $10,000, criminal penalties of up to 4 years in prison, or both.”

The Roundtable is working with policymakers to stake out a balanced position on the beneficial ownership issue that would inhibit illicit money laundering activity, yet not place unnecessary costs and legal burdens on the real estate industry.

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TRIA Reauthorization Legislation: Seven-Year Extension Introduced in Senate; Vote on Similar House Bill Scheduled Next Week

Posted on by Trey Jackson

New York Cityscape

A bipartisan, seven-year TRIA reauthorization bill – the Terrorism Risk Insurance Program Reauthorization Act of 2019 (S. 2877) – was introduced in the Senate yesterday by Thom Tillis (R-NC) along with 15 original cosponsors – including Senate Banking Committee Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH).

  • The Senate bill is similar to a House measure that would reauthorize the Terrorism Risk Insurance Program through December 31, 2027. (Roundtable Weekly, Nov. 1).
  • Both bills preserve taxpayer reforms included in the Terrorism Risk Insurance Program Reauthorization Act of 2015 and would also :

* Align the timing of mandatory recoupment from private insurers by the federal government in the event of an act of terrorism covered by the Terrorism Risk Insurance Program with the seven-year extension of the Program;

* Direct the Treasury Department in its biennial report on the Terrorism Risk Insurance Program and its effectiveness to include an evaluation of the availability and affordability of terrorism risk insurance, including specifically for places of worship; and

* Direct the Government Accountability Office to analyze and address, and report on, the vulnerabilities and potential costs of cyber terrorism, adequacy of coverage under the Program, and to make recommendations for future legislative changes to address evolving cyber terrorism risks.

  • Roundtable Chair Debra Cafaro (Chairman and Chief Executive Offer, Ventas Inc.) said, “The Roundtable is encouraged to see such positive momentum on TRIA legislation in both chambers of Congress. We will continue to work with policymakers on both sides of the aisle to communicate how this essential long-term reauthorization contributes to economic growth; avoids disruption to real estate capital flows; and ensures businesses of all types nationwide can obtain terrorism insurance well before the program’s scheduled expiration at the end of 2020.”
  • The Senate Banking Committee will markup the bill on Wednesday, Nov. 20.  While amendments are expected to be offered, the committee is expected to approve the bill on a bi-partisan basis.
  • In the House, Majority Leader Steny Hoyer today addressed legislation that will be considered next week in a leadership colloquy on the House floor.  “Madam Speaker, we will consider several bills on suspension of the rules including H.R. 4634 – the Terrorism Risk Insurance Program Reauthorization Act – a very significant and very bipartisan bill,” Hoyer said.
  • Bills considered under suspension of rules are subject a 40-minute limit on debate; a prohibition against floor amendments; and a two-thirds vote of those present and voting for passage.

The House Financial Services Committee on October 31 passed (57-0) the Terrorism Risk Insurance Program Reauthorization Act of 2019 (H.R. 4634).  In addition to extending TRIA for seven years, H.R. 4634 would also require a study on the cyber terrorism market and expand an ongoing study to also determine the availability and affordability of TRIA coverage for places of worship. (Roundtable Weekly, Nov. 1).

The Roundtable expects H.R. 4634 will pass the House next week as S. 2877 advances beyond the Senate Banking Committee.

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Lawmakers Seek Greater Opportunity Zone Oversight and Information Reporting, Float Possible Reforms

Posted on by Trey Jackson

Treasury Department x475

In response to allegations that the Treasury Secretary improperly intervened in the designation of certain census tracts as Opportunity Zones, key Democratic lawmakers put forward proposals this week to enhance Opportunity Zone information reporting, reform aspects of the tax incentives, and formally investigate the reports of wrongdoing.

  • The allegations, published in the New York Times, have been denied by both Treasury Secretary Steven Mnuchin and Michael Milken, the implicated private investor.  (Bloomberg, Oct. 29, 2019) (Letter from Michael Milken to the Milken Institute Community)
  • On Monday, the Chairman of the House Ways and Means Committee Richie Neal (D-MA) and the Ranking Democrat on the Senate Finance Committee Ron Wyden (D-OR) announced they were launching an investigation to determine “whether political appointees interfered in the process to potentially steer millions in tax breaks to longtime associates.”  (Letter to Treasury Secretary Mnuchin requesting a wide range of documents and records.)
  • The same day, Chairman Neal, Senator Wyden, Ways and Means Oversight Subcommittee Chairman John Lewis (D-GA), and Senator Cory Booker (D-NJ) sent a letter asking the Government Accountability Office (GAO) to collect and analyze information about how the Opportunity Zones incentive has been implemented by Treasury and the IRS, how census tracts were designated as Opportunity Zones, what compliance measures were used to ensure adherence to the law, and how the Treasury Department can measure the effectiveness of the tax incentive.
  • Just two day later, on Wednesday, Senator Wyden introduced the Opportunity Zone Reporting and Reform Act (S. 2787).  Under the bill, in addition to requiring greater taxpayer reporting, certain previously certified census tracts would no longer qualify as Opportunity Zones.  Several types of real estate assets would be blacklisted and ineligible for investment (e.g., self-storage property, stadiums, casinos).  In the case of opportunity funds that are renovating or rehabilitating existing structures, the bill would increase the level of new investment required to qualify for benefits.
  • The Wyden bill would exclude multifamily housing as an eligible Opportunity Zone investment unless 50 percent or more of the housing units are rent-restricted and occupied by tenants whose income is 50 percent or less of the area median income.  (Detailed Summary)
  • If enacted, the restriction on multifamily housing could have a profound negative impact on future Opportunity Zone investment.  New research indicates that multifamily construction starts represented over one-half (53.2%) of the total commercial real estate investment in Opportunity Zones over the last 18 months.  (CBRE, Multifamily Development: A Bright Spot in Opportunity Zone Initiative, Nov. 6, 2019)
  • Also on Wednesday, Representatives Ron Kind (D-WI), Mike Kelly (R-PA), and Terri Sewell (D-AL) unveiled bipartisan draft legislation to enhance reporting requirements for opportunity funds.  The Opportunity Zone Accountability and Transparency Act would require opportunity funds to submit annual information reports that would be publicly available.  In the case of real estate investments, funds would report information such as: the aggregate amount invested, structures’ square footage, the number of residential units, the number of low-income residential units, and the number of employees, Failure to report information accurately could trigger a penalty up to $200,000.

Since its enactment, The Real Estate Roundtable has strongly supported the Opportunity Zone tax incentives as a potential powerful catalyst for transformational real estate investment in economically struggling parts of the country. Through its Tax Policy Advisory Committee and Opportunity Zone Working Group, The Roundtable has played an active role throughout the lengthy rulemaking process, offering constructive comments and recommendations to Treasury officials. (GlobeSt.com interview with Roundtable President and CEO Jeffrey DeBoer) (Roundtable Weekly, Dec. 21, 2018)

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Senate Banking Committee Considers Legislation to Promote Affordable Housing; White House Hosts Housing Roundtable

Posted on by Trey Jackson

The Senate Banking, Housing, and Urban Affairs Committee on Thursday held a hearing, “Examining Bipartisan Bills to Promote Affordable Housing Access and Safety,” to discuss bipartisan legislation aimed at expanding access to affordable housing generally and improving safety conditions in federally-assisted housing specifically.

  • Among the bills considered at the hearing were:
    • the HUD Manufactured Housing Modernization Act (S.1804).  This bill would confirm for state and local recipients of funding from the Department of Housing and Urban Development (HUD) (such as Community Development Block Grants), that manufactured housing is eligible for public dollars for construction and repair; and
    • the Fostering Stable Housing Opportunities Act (H.R. 4300), which advanced unanimously by the House of Representatives’ Financial Services Committee in September.  This bill would authorize HUD to allocate Section 8 housing choice vouchers directly to any public housing agency that aims to assist youths aging out of foster care and at risk of losing their housing safety net.
  • Mark Yost (CEO, Skyline Champion Corp.) testified on behalf of the Manufactured Housing Institute (“MHI”) in support of S. 1804.  He stated that increased construction costs combined with labor shortages render manufactured housing a logical solution to help increase affordable housing options.  (Mark Yost Testimony)
  • The Roundtable advocates that safe, decent and affordable housing is essential to the well-being of America’s families, communities and businesses.  The Roundtable is developing a multi-faceted strategy and is assessing policies such as those that encourage:
    • State and local governments to adopt and implement Yes in My Backyard (“YIMBY”) land-use policies to entitle affordable housing projects, such as high-density zoning and expanding by-right multifamily zoned areas;
    • Development of low-income and workforce housing units as a priority when the U.S. government disposes under-utilized and surplus federal properties;
    • Construction of manufactured housing – the only form of housing regulated by a Federal building code that includes standards for health, safety, and energy efficiency – as a gateway that opens the door for homeownership for millions of families;
    • Increased support for HUD’s Section 8 voucher program to assist very low-income, elderly, and disabled Americans to afford housing in the private market; and
    • Modernizing the role of Fannie Mae and Freddie Mac through GSE reform, to focus their mission on providing liquidity in mortgage markets geared toward low-income and middle-class home ownership.
  • On November 1, Roundtable President and CEO, Jeffrey D. DeBoer, raised these priorities in a housing affordability summit at the White House with HUD Secretary Ben Carson and other industry leaders.  DeBoer’s comments followed on the heels of Secretary Carson’s remarks to The Roundtable several days prior at its 2019 Fall Meeting.  (Roundtable Weekly, November 1, 2019).    

The Roundtable will continue to work with our industry partners, the Administration, and Congress to implement a multifaceted strategy that addresses the nation’s housing affordability crisis.

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EB-5 Reform Bill Introduced in Senate; DHS Regulations Scheduled to Take Effect November 21

Posted on by Trey Jackson

U.S. Capitol

A comprehensive legislative overhaul of the EB-5 investment program was introduced in the Senate on Tuesday – as both the program’s expiration and the effective date for new agency regulations are expected on November 21.

  • The Immigrant Investor Program Reform Act (S. 2778), sponsored by Senators Mike Rounds (R-SD), Judiciary Committee Chairman Lindsey Graham (R-SC), and John Cornyn (R-TX), would extend the EB-5 regional center program until September 30, 2025.  The bill includes a comprehensive suite of long overdue measures to deter fraud and optimize national security protections, in the context of inbound foreign investment capital that helps finance U.S. economic development and spur American job growth. 
  • Key elements of S. 2778  include provisions to: 
    • Establish an EB-5 Integrity Fund to provide rigorous program oversight, to be funded by regional center participants;
    • Provide DHS with improved investigative tools to ensure that an investor’s funds are derived from legitimate and lawful sources;
    • Clarify DHS’s authority to deny or revoke immigrant investor petitions for reasons including fraud, misrepresentation, or national security concerns;
    • Allow bona fide sovereign wealth funds to co-invest in projects supported by EB-5 capital;
    • Provide visa “set asides” to help direct EB-5 capital to projects in rural areas and census tracts designated by the U.S. Treasury as “opportunity zones”; and
    • Establish new investment levels to $1 million for projects in rural and opportunity zone Targeted Employment Areas (TEAs); and to $1.1 million for non-TEA projects.

     

  • Compromise reform principles set forth by a coalition of rural and urban stakeholders in May reflect a number of provisions in the new bill.  (Roundtable Weekly, May 17, 2019)
  • The rural and urban business interests recommending EB-5 modernization have consistently urged holistic reforms from Congress, as opposed to piecemeal regulatory changes by the Department of Homeland Security (DHS).  (Roundtable Weekly, March 8, 2019)  The imminent agency regulations – scheduled to take effect on November 21, unless they are superseded by Congress – do not accomplish important objectives set forth in the Rounds-Graham-Cornyn bill, such as the fraud deterrence provisions, national security enhancements, and visa set asides for investors in rural and distressed urban area projects.  (Roundtable Weekly, July 26, 2019) 

November 21 is also the date that the underlying legislative authorization of the program expires, as connected to the current continuing resolution (CR) that keeps the federal government running.  For the past five years, Congress has consistently extended the EB-5 regional center program concurrently with spending measures that continue federal operations.  The timing of the DHS rules’ effectiveness and the program’s expiration on November 21, along with S. 2778’s introduction, are expected to spur new rounds of legislative negotiation for long-term EB-5 reform in the coming weeks.

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Seven-Year TRIA Reauthorization Advanced by House Financial Services Committee

Posted on by Trey Jackson

House Financial Services Committee Chairwoman Maxine Waters (D-CA)

The House Financial Services Committee yesterday unanimously (57-0) passed the Terrorism Risk Insurance Program Reauthorization Act of 2019 (H.R. 4634) – a “clean” seven-year extension of the Terrorism Risk Insurance Act (TRIA), which is a top policy priority of The Real Estate Roundtable. 

  • The bipartisan House compromise bill also requires two studies: a U.S. Government Accountability Office (GAO) study on the cyber terrorism market and a biennial Treasury reporting on the ‘availability and affordability’ of TRIA coverage for places of worship.
  • Committee Chairwoman Maxine Waters (D-CA), above, in her opening committee markup statement noted, “This bipartisan bill provides a simple long-term reauthorization of the Terrorism Risk Insurance Program. Without a reauthorization, the program would expire at the end of 2020, but we could experience the harmful effects of a failure to reauthorize as soon as January of 2020. I am very pleased that I have reached a bipartisan compromise with Ranking Member [Patrick] McHenry [R-NC] on this issue for a seven-year reauthorization of this very important program.” (Committee Markup documents and video, Oct 29)
  • The Coalition to Insure Against Terrorrism (CIAT), which includes The Real Estate Roundtable, wrote to the committee’s leadership on Tuesday in support of H.R. 4634.  (CIAT letter, Oct. 29)
  • TRIA, originally passed in 2002, has been extended in 2005, 2007 and again in 2015 – following a 12-day lapse when Congress failed to complete their work on reauthorization at the end of 2014.
  • TRIA was the focus of a discussion during The Roundtable’s Oct. 30 Fall Meeting with American Property and Casualty Insurance Association President and CEO David Sampson.  The discussion emphasized that a long-term, clean TRIA reauthorization by Congress is needed as soon as possible to avoid market dislocation and provide certainty to commercial real estate policy holders who are actively renewing their coverage. 
  • Roundtable President and CEO Jeffrey DeBoer noted during an October 1 podcast episode of Through The Noise, “Businesses and facilities of all types need to see the terrorism risk insurance program extended. This need applies to hospitals, all commercial real estate buildings, educational facilities, sports facilities, NASCAR and theme parks, and really any place where commercial facilities host large numbers of people.”

The next step toward TRIA reauthorization is a floor vote in the House, which may occur before year-end. 

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Panel Draws Attention to How IRS Guidance is Impeding Jobs, Foreign Investment in U.S. Real Estate and Infrastructure

Posted on by Trey Jackson

FIRPTA panel -- The Future of Real Estate Policy

Leading industry experts convened on Oct. 30 at the National Press Club in Washington for an in-depth discussion on IRS Notice 2007-55, which levies discriminatory tax penalties on foreign investment in U.S. real estate and infrastructure.  The panel detailed how the Notice subjects foreign owners of domestically controlled real estate investment trusts (REITs) to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) when the REIT liquidates, thereby suppressing capital investment and job creation in the real estate industry.

  • The 2007 tax guidance from the IRS overturned long-standing practice that treated liquidating distributions and redemptions of REITs as sales of stock.  Under Notice 2007-55, these transactions are now treated as taxable distributions and subject to a burdensome capital gains tax – affecting only foreign shareholders.  In the 12 years since Treasury issued the Notice, there have been no clarifying regulations, which has created uncertainty among potential investors and deterred foreign investment in U.S.-based real estate and infrastructure.
  • Panelists at the event, sponsored by Unibail-Rodamco-Westfield, included Ryan McCormick, Senior Vice President and Counsel for The Real Estate Roundtable (far right in photo above); John Jones, Vice President of Government Relations for Nareit; Kevin Klein, Director of Tax Policy for the Organization of International Investment (OFII); Darin Mellott, Director of Research, Americas at CBRE; and David Polster, Tax Partner at Skadden Arps.
  • McCormick emphasized that FIRPTA is a tax burden that does not apply to any other asset class and noted that FIRPTA hurts the ability of the United States to attract outside capital for infrastructure improvements.  Treasury could act on its own to remove much of the FIRPTA burden simply by withdrawing the IRS guidance. “Anything the Administration can be doing now to drive our economy forward and create jobs, they should,” said McCormick.
  • Outright repeal of the outdated FIRPTA law is The Roundtable’s ultimate policy goal.  In April 2019, Representatives John Larson (D-CT) and Kenny Marchant (R-TX) introduced the Invest in America Act (H.R. 2210), a bill to repeal FIRPTA altogether.  The Roundtable and 19 national trade organizations – representing every aspect of constructing, developing, financing, owning, and managing real estate and infrastructure in the United States – wrote to Ways and Means Committee Members and other key House lawmakers urging them to support the legislation.  (Comment Letter, March 28)
  • Both Republican and Democratic lawmakers agree on the negative impact that the Notice continues to exert on infrastructure investments.  In 2017, 32 bipartisan members of the House Ways and Means Committee wrote to Treasury Secretary Steven Mnuchin urging him to repeal the Notice.  The lawmakers pointed to billions of dollars’ worth of investment that flowed to small and mid-sized communities when 2015 legislation eased some of the tax burden for foreign investors.

A report by the Rosen Consulting Group (RCG) estimated that FIRPTA repeal would generate an initial increase of between $65 billion and $125 billion in international investment in U.S. commercial real estate. This new level of activity would lead to the creation of 147,000 to 284,000 jobs throughout the economy and increase taxpayers’ income by $8 billion to $16 billion.  (Unlocking Foreign Investment in U.S. Commercial Real Estate, July 2017) 

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Industry Leaders and Policymakers Address National Issues Affecting CRE, Including TRIA, Affordable Housing, Tax and Monetary Policy

Posted on by Trey Jackson

This week’s Real Estate Roundtable Fall 2019 Meeting in Washington featured discussions with congressional lawmakers on national policy issues affecting economic growth, job creation, local communities and the commercial real estate industry.  Roundtable members engaged policymakers and other speakers on a wide range of issues, including terrorism insurance; affordable housing; GSE reform; opportunity zones; FIRPTA repeal; infrastructure; energy and climate; and monetary policy. 

Roundtable Chair Debra A. Cafaro (Chairman & CEO, Ventas, Inc.) launched the meeting by noting how the organization remains focused on its national policy agenda.  Cafaro added that The Roundtable continues to move forward from its 20-year foundation with 17 industry association partners and membership-driven policy advisory committees.  She emphasized, “We will continue to do the research necessary to make our case on issues with policymakers, and work across product types and entity classifications to advance strong, sustainable national policy for the industry.”  

Speakers at The Roundtable’s Fall Meeting included: 

  • Dr. Ben Carson—Secretary, U.S. Department of Housing and Urban Development (HUD)—discussed the Administration’s efforts to reshape the role of the Government Sponsored Enterprises (GSEs) by capitalizing Fannie Mae and Freddie Mac before ending their government conservatorship.  He also noted a Stanford University study on rent control legislation that found such actions decreased rental costs in the short-term, yet decreased the supply of affordable housing in the long-term.
  • Sen. Jacky Rosen (D-NV)—Member, Senate Committees on Commerce, Science and Transportation; Homeland Security and Governmental Affairs; and member of the Problem Solvers Caucus while she served in the House of Representatives—noted the importance of public-private partnerships for infrastructure investments, economic growth and community improvements.  She also lauded Opportunity Zones as an incentive to create more affordable housing in her state. 
  • Sen. Rick Scott (R-FL)—Member, Senate Committees on Budget; Commerce, Science and Transportation; Homeland Security and Governmental Affairs—addressed the importance of bipartisanship to achieve legislative goals.  He discussed the efforts of policymakers to reach solutions on immigration issues such as DACA, border security and Visa reform.
  • David Sampson—President and CEO, American Property Casualty Insurance Association—discussed the need to reauthorize the Terrorism Risk Insurance Act (TRIA) and current efforts in Congress to enact a “clean” multi-year extension as soon as possible.  He added that cyberterrorism was an increasing risk to business interruption in the marketplace.
  • Dana Peterson—Global Economist, Citgroup—spoke about how consumer spending trends, demographics and market conditions have led to the 11th year of economic expansion in the U.S.  She also forecast continued growth as domestic companies lead the way in technology areas affecting Artificial Intelligence, 5G and blockchain.
  • Charlie Cook—Political Analyst for The National Journal Group; Editor and Publisher of The Cook Political Report—spoke about the electoral landscape, the increase in “tribal” partisanship and how a sharp increase in voter engagement is expected in the upcoming presidential election. 

Following the business meeting, informal dinners were held with congressional policymakers and Roundtable members to discuss policy issues in more detail. 

Next on the Roundtable’s meeting calendar is the all-member State of the Industry Meeting on January 28, 2020, which will be held in conjunction with its policy advisory committee meetings in Washington, DC.

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House Hearing Focuses on Reducing Carbon Emissions from Buildings

Posted on by Trey Jackson

House Select Committee on the Climate Crisis Chair Kathy Castor (D-FL)

An Oct. 17 hearing before the House Select Committee on the Climate Crisis, “Solving the Climate Crisis: Cleaner, Stronger Buildings,” focused on reducing carbon pollution and improving resilience in residential and commercial buildings across the nation as a method of countering the effects of climate change.  (Hearing video and witness statements)

  • The Select Committee is chartered to study and make recommendations to reduce greenhouse gas emissions and develop solutions to combat climate change.  It lacks authority to introduce legislation, but is scheduled to publish a set of recommendations for bill-writers by March 31, 2020.
  • Committee Chair Kathy Castor (D-FL), above, stated at the hearing that “[a]n ambitious national plan for cleaner, stronger buildings requires national leadership. And Congress needs to offer smart incentives, to set a direction for the numerous federal, state, and local officials involved in the buildings sector.”
  • Committee Ranking Member Garret Graves (R-LA) emphasized that reauthorization of the flood insurance program and other Committee recommendations must “advance[ ] the goal of resiliency, [housing] affordability, and energy efficiency conservation. [W]e can achieve multiple goals.”
  • The Real Estate Roundtable has long been a leading advocate for energy efficiency in buildings, spearheading significant policy developments in this arena.  For example, the Sustainability Policy Advisory Committee (SPAC) was critical to the creation of EPA’s ENERGY STAR for buildings program in 1998, and its evolution to ENERGY STAR for Tenants in 2015.
  • Recently, SPAC’s assistance to EPA resulted in improved and updated models for federal ratings regarding building energy efficiency performance.  (Roundtable Weekly, July 19).  Current SPAC initiatives include efforts to refine the next version of ENERGY STAR for Tenants (to be unveiled in 2020 and cover retail as well as office leased spaces), and coordinate with the agency on key data it collects regarding the carbon footprint of the nation’s electricity grid.
  • On the legislative front, The Roundtable has long supported the Energy Savings and Industrial Competitiveness (ESIC) Act (S. 2137), co-sponsored by Sens. Rob Portman (R-OH) and Jeanne Shaheen (D-NH).  (Roundtable support letter for S. 2137) The Senate Energy Committee advanced the ESIC Act last month. (Roundtable Weekly, Sept. 27).
  • The ESIC Act “is exactly the kind of smart, forward-looking policy that will help building owners respond to our modern, evolving economy” Roundtable President and CEO Jeffrey DeBoer stated in a Senate news release upon the bill’s introduction this summer.  (Roundtable Weekly, July 19) (Video of DeBoer’s statement)
  • Also in the Senate, Delaware Democrat Chris Coons and Indiana Republican Mike Braun have formed a climate caucus aimed at creating bipartisan consensus on ways to reduce carbon dioxide emissions.  The purpose of the Senate Climate Solutions Caucus is outlined by the two Senators in an Oct. 23 opinion piece in The Hill. 

The Roundtable will provide comments to the House Select Committee on the Climate Crisis, summarizing our energy efficiency advocacy agenda.  The committee’s questions for stakeholders are posted at https://climatecrisis.house.gov/inforequest, with submissions due by November 22.

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Administration Officials Testify on GSE Reform, Housing Affordability; NMHC Releases Data on Ramifications of States’ Rent Control Legislation

Posted on by Trey Jackson

Mnuchin, Carson, Calabria at HFSC Oct hearing

The House Financial Services Committee held an Oct. 22 hearing – “The End of Affordable Housing? A Review of the Trump Administration’s Plans to Change Housing Finance in America” to review the Trump administration’s plans to change housing finance in the U.S.   (Committee memorandum, Oct. 17)

  • Witnesses included Treasury Secretary Steven Mnuchin; Dr. Ben Carson, Department of Housing and Urban Development (HUD) Secretary; and Dr. Mark Calabria, Federal Housing Finance Agency (FHFA) Director.  Topics discussed included reforms to the Government Sponsored Entities (GSEs) Fannie Mae and Freddie Mac, Housing Affordability and Rent Control.  (Video of the Oct. 22 hearing)
  • Treasury and HUD unveiled plans last month to wind down the 11-year long federal conservatorships of Fannie and Freddie, which support the multi-trillion U.S. housing market by securitizing and guaranteeing residential mortgages. (Roundtable Weekly, Oct. 4 and (CQ, Oct. 22)
  • The administration plans to reduce the size of Fannie and Freddie with an explicit government guarantee that would be open to private competitors who comply with underwriting standards from FHFA, the federal government’s GSE regulator.
  • Committee Chairwoman Maxine Waters (D-CA) stated that the Trump Administration’s housing finance reform plan would be disastrous for the U.S. housing system. She said that the Administration’s plan would abolish affordable housing goals that help to support affordable home ownership and rental housing, replacing them with a mortgage fee that has not been explained in detail.
  • Treasury Secretary Mnuchin testified, “I was surprised and disappointed by the title of this hearing. To be clear, Treasury does not propose – and indeed opposes – reducing or eliminating the government-sponsored enterprises’ longstanding support for affordable housing.”
  • During Q&A, HUD Secretary Carson stated that opportunity zone tax incentives revitalize business in specific geographic areas, which then incentivizes the building of affordable housing.
  • In response to question about rent control from Rep. Alexandria Ocasio-Cortez (D-NY), FHFA Director Calabria agreed there is a lack of affordable rental housing, especially in certain cities like New York – but added he did not think it should be the federal government’s responsibility to tell someone what price they have to rent their property.
  • In a separate development, new data released this week by the National Multifamily Housing Council (NMHC) highlights the ramifications of California joining Oregon and New York in passing sweeping rent control legislation. (Roundtable Weekly, Oct. 11) 
  • The October NMHC Quarterly Survey shows 34% of multifamily firms who operate in rent control jurisdictions have  reduced investments in those areas – a significant jump from the July survey, where 20% of firms indicated they were cutting back investment in rent controlled areas. (NMHC, Oct. 22)
  • Roundtable President and CEO Jeffrey DeBoer addresses rent control in Walker and Dunlop’s recently released “Quarterly Multifamily Outlook Quarterly Report for Fall 2019.”  DeBoer states, “Although we focus on national issues, we do have concerns about the more local trend to enact rent control. These laws are destructive. They may help those people in the short term but those same people are hurt in the long run by giving them lower and lower quality housing. It ends up being very inequitable over time and hopefully the trend will not gain additional traction.”

Regarding housing finance and GSE reform, The Roundtable and 27 industry organizations on March 1 submitted principles for reforming the GSEs.  The letter emphasized that compelling evidence must show the private market is capable of an expanded role before efforts are made to reduce the GSEs’ current housing finance footprint. “Ultimately, we believe any reform, be it administrative or legislative, must seek to further two key objectives: 1) preserving what works in the current system, while 2) maintaining stability by avoiding unintended adverse consequences for borrowers, lenders, investors, or taxpayers.”  (Roundtable Weekly, March 1)

GSE reform, housing affordability and recent state measures on rent control will be discussed during The Roundtable’s Fall Meeting on Oct. 30 in Washington.

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