Author: Trey Jackson

Roundtable Proposes Modifications to Treasury’s Opportunity Zone Rules

Posted on by Trey Jackson

The Real Estate Roundtable on July 1 submitted recommended clarifications for final Opportunity Zones tax regulations, which are expected from the Treasury Department before the end of 2019.  (Roundtable comment letter , July 1) 

The Real Estate Roundtable on July 1 submitted recommended clarifications for final Opportunity Zones tax regulations. 
  • This month’s Roundtable 12-page comment letter to Treasury and the IRS encourages the government officials to include 10 key clarifications in their final regulations. (The Roundtable submitted prior letters on OZ tax incentives in June 2018 and December 2018.) 

    The recommendations would: 

  1. clarify that gross section 1231 gain (gain that relates to property used in a trade or business) is eligible for investment in an Opportunity Fund; 
  2. further facilitate the use of “aggregator funds” for multi-asset Opportunity Funds; 
  3. allow existing owners to retain a carried or profits interest when selling property to related Opportunity Fund; 
  4. clarify that the working capital safe harbor applies during the construction of qualifying property; 
  5. encourage investment in languishing Opportunity Zone properties by treating investment in vacant property favorably; 
  6. promote ambitious and transformative projects by allowing assets to be aggregated together under the substantial improvement test; 
  7. ensure that property that straddles inside and outside of an Opportunity Zone qualifies; 
  8. treat property that will be demolished as “unimproved land” for Opportunity Zone purposes; 
  9. confirm that investors qualify for the tax benefits when an Opportunity Zone business sells an asset after 10 years; and 
  10. make certain additional clarifications related to Opportunity Zones and REITS.  

  • Cushman & Wakefield’s new publication –  ” In the Opportunity Zone: Location. Timing. Capital ” – reports that capital inflows into OZs could increase by $100 billion.  

    Roundtable President and CEO Jeffrey DeBoer states in the letter, “Partnering with local leaders and entrepreneurs, real estate-focused opportunity funds will spur long-term, patient investment that drives productive economic activity.  Real estate projects financed through opportunity funds will generate well-paying jobs, improved infrastructure, and a built environment that helps attract and retain new businesses and employers. Regulatory clarifications along the lines described above will help ensure that the Opportunity Zone incentives fulfill their ambitious objectives.”  

  • Cushman & Wakefield’s new publication – “In the Opportunity Zone: Location. Timing. Capital” – reports that capital inflows into OZs could increase by $100 billion.  The company is tracking 138 large CRE funds targeting more than $44B in equity that intend to invest in multiple product types.  The report also states Opportunity Zone prices are rising 14% for redevelopment projects and 20% for land sites. (Commercial Property Executive, July 8) 

Additionally, Forbes and the Sorensen Impact Center at the University of Utah have launched a nation-wide competition to feature the top leaders, investors and entrepreneurs who are pioneering creative approaches to equitably revitalize distressed OZ communities throughout the nation.  Applications and nominations for the Forbes OZ 20 close Aug. 31.  (Forbes, July 11) 

 

Policymakers Under Pressure to Raise Debt Ceiling Before Summer Congressional Recess

Posted on by Trey Jackson

New forecasts that the federal government may be unable to pay its bills by the first half of September have put pressure on policymakers to raise the nation’s debt ceiling before Congress departs for summer recess – or face the prospect of a national default.

The House of Representatives is scheduled to leave for a six-week recess on July 26 and the Senate one week later; both are set to return on Sept. 9.
  • If the debt limit is not increased to meet the nation’s financial obligations, the government could miss payments to federal employees for salaries and pensions, debt service to foreign lenders, and potentially interest payments on the federal debt.  
  • Today, Treasury Secretary Steven Mnuchin wrote to House Speaker Nancy Pelosi (D-CA), stating: “Based on updated projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes. As such, I request that Congress increase the debt ceiling before Congress leaves for summer recess.”  (CNBC, and Politico, July 12)  The House of Representatives is scheduled to leave for a six-week recess on July 26 and the Senate one week later; both are set to return on Sept. 9. 
  • Pelosi and Mnuchin have been in discussions this week regarding the debt ceiling.  She said yesterday that Congress should combine a debt ceiling raise with a budget deal that sets federal spending limits for two-years, and that she is “personally convinced that we should act on the (budget) caps and the debt ceiling … prior to recess.”   (Politico, July 12)  
  • Both Pelosi and Senate Majority Leader Mitch McConnell (R-KY) have expressed interest in combining an increase in the debt ceiling with a two-year budget deal.  (The Hill, July 12)  Congressional leaders are eager to avoid a series of automatic spending cuts known as “sequestration,” which will take place without a new deal on budget caps. 
  • On July 9, McConnell said, “I don’t think there’s any chance we will allow the country to default.  As to the timing, we’re going to stay in close communication with the secretary of the Treasury about when that actually must be done, and we’ll no doubt do it on a bipartisan basis.”  (Bloomberg, July 12)  

  •  According to the Bipartisan Policy Center (BPC) projections, the nation’s $22 trillion debt limit could be exceeded in the first half of September, based on new data and analysis.
    – enlarge graphic – 

      Federal Reserve Chairman Jerome Powell testified yesterday before the Senate Banking Committee that the global economy could suffer “unthinkable” damage if the White House and Congress fail to raise the debt ceiling. (The Hill, July 11)

    • Aside from reaching agreements regarding the debt ceiling and budget caps, Congress must further come to a deal on federal agency appropriations for FY’20 – to avoid a government shutdown before current FY’19 dollars run out on September 30. Last December and January, the lack of a government spending deal led to a 35-day partial government shut down. (Roundtable Weekly, Feb. 1) 
    • According to a Treasury report released yesterday, this fiscal year’s tax receipts to date have not offset higher federal spending – even though this month marks a historic 10-year record for U.S. economic expansion.  (Wall Street Journal, July 11) 
    • The Treasury figures show the federal deficit grew to $747 billion over the past nine months, 23% more when compared to the same time period last year.  The report also projects the deficit to exceed $1 trillion by Sept. 30, the end of the government’s fiscal year.  (Monthly Treasury Statement and Associated Press, July 11) 

    This week, the Bipartisan Policy Center (BPC) projected the nation’s $22 trillion debt limit could be exceeded in the first half of September, based on new data and analysis.  The BPC also reported that federal revenues for Fiscal Year 2019 have been sluggish, with overall revenue growth running at less than three percent. (BPC news release, July 8 and BPC Debt Limit Analysis).

     

     

     

    Roundtable Re-Elects Ventas’ Debra Cafaro as Chair; Installs Three New Members to Board

    Posted on by Trey Jackson

    As The Real Estate Roundtable marks its 20th anniversary, its members have re-elected Debra A. Cafaro (Chairman and Chief Executive Officer, Ventas, Inc.) as Chair, while approving its Board of Directors for the 2020 fiscal year (July 1, 2019 – June 30, 2020).

    Roundtable President and CEO Jeffrey DeBoer and Roundtable Chair  Debra A. Cafaro (Chairman and Chief Executive Officer,  Ventas, Inc .)  during The Roundtable’s June 2019 Annual Meeting.
    • The election results were announced by Roundtable President and CEO Jeffrey DeBoer during the organization’s Annual Meeting earlier this month in Washington. 
    • The 23-member FY2020 Board is elected from the membership and includes four elected leaders of national real estate trade organizations from The Roundtable’s 17 partner associations.  Three new Roundtable members join the FY2020 Board.
    • Cafaro, whose three-year term as chair began July 1, 2018, said, “We welcome our three new industry leaders to the Board and express gratitude for the service of our three outgoing members, who contributed greatly to The Roundtable’s success in the past year.  With such deep expertise among our membership, we will develop practical solutions to the pressing policy challenges ahead that not only affect our industry, but provide a positive impact to communities throughout the nation.”
    • DeBoer stated, “As we move beyond our first two decades of advocacy work in Washington, The Real Estate Roundtable will continue to bring together the top leaders in commercial real estate with our partner real estate organizations.  Our mutual goal remains consistent – provide policymakers with fact-based analysis that supports responsible economic growth policies, creates sustainable jobs and increases the quality of life for working Americans.”

    Joining The Roundtable’s Board of Directors as of July 1 are:

    • Scott O. Jones, Principal, Jacobs Inc. and Chair and Chief Elected Officer, Building Owners and Managers Association (BOMA), International
    • Amy Rose, President & CEO, Rose Associates
    • Robert Spottswood, President of Spottswood Companies and Chair of the American Resort Development Association (ARDA)

    See the complete list of the FY2020 Roundtable’s Board of Directors here.

    Stepping down from The Roundtable Board as of July 1 are:

    • Tom Baltimore, Jr., Chairman, President & CEO of Park Hotels & Resorts, and Immediate Past Chair of Nareit
    • Steve Hason, Managing Director and Head of Americas Real Estate & Infrastructure with APG Asset Management US and Immediate Past Chair of PREA
    • David Neithercut, former President & CEO of Equity Residential

    The Roundtable’s FY2019 Annual Report – Building Strong Public Policy: Now and For the Future – was also released during the June meeting.

    SCOTUS: Federal Courts Now Open to Property Takings Claims Against Local Governments

    Posted on by Trey Jackson

    The Supreme Court of the United States (SCOTUS) issued a landmark property rights decision on June 21, ruling that the federal courts are open to decide landowners’ claims for a Fifth Amendment “taking” of property by local regulatory agencies. 

    T he Supreme Court of the United States issued a landmark property rights decision on June 21, ruling that the federal courts are open to decide landowners’ claims for a Fifth Amendment “taking” of property by local regulatory agencies.
    • In Knick v. Township of Scott , the nation’s highest court  reversed a 1985 precedent that had forced property owners to first bring takings lawsuits in state courts, which acted as “gatekeepers” to block the claims from ultimately getting to federal court.
    • The 5-4 ruling in Knick holds that suits arising under the Takings Clause can be brought as an initial matter in U.S. trial courts, and then appealed as of right in U.S. circuit courts – just like any other alleged grievance to vindicate protections in the Constitution’s Bill of Rights.  Such matters are no longer relegated to state judges for resolution.  Federal courts are now proper venues to test the constitutionality of aggressive land-use decisions by local regulators, and can decide whether landowners are owed “just compensation” for a property taking.  (SCOTUSblog Opinion Analysis, June 22.) 
    • Chief Justice Roberts’s majority opinion corrected the litigation dilemma for property owners trapped between the state and federal judiciaries.  “The takings plaintiff thus finds himself in a Catch-22:  He cannot go to federal court without going to state court first; but if he goes to state court and loses, his claim will be barred in federal court,” Roberts wrote. “The federal claim dies aborning.”
    • Roberts added, “Takings claims against local governments should be handled the same as other claims under the Bill of Rights.  We now conclude that the state litigation requirement imposes an unjustifiable burden on takings plaintiffs, conflicts with the rest of our takings jurisprudence, and must be overruled.” 
    • In an amicus brief supporting the property owners, AARP advocated the “state court first” rule imposed “costly and needless litigation burdens” which “pose a threat to the economic security of older Americans of modest means especially, given their higher vulnerability to property tax foreclosure and lack of resources.”  (Forbes, June 22).     

    The attorney representing the property owners before SCOTUS remarked that Knick “reject[s] barriers that unfairly deny property owners their day in court [and] sends a message that property rights are just as sacred as all other rights.”  (Pacific Legal Foundation, June 21.) 

     

    Real Estate Provisions Included in Tax Extenders Legislation Approved by House Ways and Means Committee

    Posted on by Trey Jackson

    The House Ways and Means Committee yesterday passed legislation to extend a host of expired and expiring tax credits through 2020 by a vote of 25-17.  Among the bills advanced to the House floor for consideration is the Taxpayer Certainty and Disaster Tax Relief Act of 2019 (H.R. 3301), which includes a deduction for energy efficient commercial buildings (Section 179D).  (House Ways and Means, Markup of Tax Legislation).

      The House Ways and Means Committee yesterday passed legislation to extend a host of expired and expiring tax credits through 2020, including several afecting real estate.
    • Committee Chairman Richard Neal (D-MA) said in his opening statement that extenders would provide “needed certainty for businesses making use of tax provisions that expired in 2017 and 2018, as well as some set to expire this year.”  
    • In addition to the Section 179D tax deduction, H.R. 3301 and its Amendment in the Nature of a Substitute contain other provisions affecting real estate:   

      • Credit for construction of new energy efficient homes (sec. 45L)   

      • Credit for energy efficient improvements to principal residences (sec. 25C)

      • Exclusion of mortgage debt forgiveness (sec. 108(a)(1)(E)) 

      • Deductibility of mortgage insurance premiums (sec. 163(h)(3)(E)) 

      • New markets tax credit (sec. 45D) 

      • Empowerment zone tax incentives (sec. 1391-97 )

    In conjunction with the markup, the Joint Committee on Taxation (JCT) issued a report on the estimated revenue effects of H.R. 3301, concluding the extenders bill portion would cost $42.5 billion, which includes $9.3 billion in tax relief for disaster areas. (JCT technical description)  

    Ways and Means Chairman Neal indicated he plans to hold a Committee vote on a technical corrections bill later in the year.  
    • The Democrats’ bill would accelerate expiration of the increase in the estate tax exemption that was included in the Tax Cuts and Jobs Act (TCJA).  TCJA doubled the estate tax exemption from $5.7 million to $11.4 million (indexed for inflation).  Under current law, the temporary increase expires at the end of 2025.  In order to pay for the tax extender legislation, the bill accelerates expiration of the estate tax exemption increase to the end of 2022. 
    • Several Republicans expressed concerns over continuing to pass tax “extenders” legislation without looking for long-term solutions to reform, make permanent, or repeal the various provisions.  Chairman Richard Neal (D-MA) said he is willing to consider any suggested reforms at a later stage. (BGov, June 20)
    • In response to an unsuccessful Republican amendment that would have made a number of technical corrections to TCJA, including a much-needed reduction in the cost recovery period for qualified improvement property, Chairman Neal indicated he plans to hold a Committee vote on a technical corrections bill later in the year. 

    The Democratic extender bill is widely viewed as an initial negotiating position for talks with Senate Republicans.  Additional changes may be made as the bill goes to the House floor.  In the Senate, Finance Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) in May announced the formation of several bipartisan taskforces to examine and help permanently resolve the fate of more than 30 expired and expiring tax provisions. (Senate Finance Committee   Announcement , May 16 and Roundtable Weekly , May 17) 

    Real Estate Roundtable Re-Elects Ventas’ Debra A. Cafaro as Chair; Installs Three New Members to Board

    Posted on by Trey Jackson

    FY2020 Roundtable Board of Directors Effective July 1

    (WASHINGTON, D.C.) — As The Real Estate Roundtable marks its 20th anniversary, its members have re-elected Debra A. Cafaro (Chairman and Chief Executive Officer, Ventas, Inc.) as Chair, while approving its Board of Directors for the 2020 fiscal year (July 1, 2019 – June 30, 2020).

    The election results were announced in June by Roundtable President and CEO Jeffrey DeBoer during the organization’s Annual Meeting in Washington.  The Roundtable’s FY2019 Annual Report – Building Strong Public Policy: Now and For the Future – was also released during the June meeting.

    The 23-member FY2020 Board is elected from the membership and includes four elected leaders of national real estate trade organizations from The Roundtable’s 17 partner associations.  Three new Roundtable members join the FY2020 Board.

    Cafaro, whose three-year term as chair began July 1, 2018, said, “We welcome our three new industry leaders to the Board and express gratitude for the service of our three outgoing members, who contributed greatly to The Roundtable’s success in the past year.  With such deep expertise among our membership, we will develop practical solutions to the pressing policy challenges ahead that not only affect our industry, but provide a positive impact to communities throughout the nation.”

    DeBoer stated, “As we move beyond our first two decades of advocacy work in Washington, The Real Estate Roundtable will continue to bring together the top leaders in commercial real estate with our partner real estate organizations.  Our mutual goal remains consistent – provide policymakers with fact-based analysis that supports responsible economic growth policies, creates sustainable jobs and increases the quality of life for working Americans.”

    Joining The Roundtable’s Board of Directors as of July 1 are:

    • Scott Jones, Principal, Jacobs, Inc. and Chairman of Building Owners and Managers Association (BOMA) International
    • Amy Rose, President & CEO, Rose Associates
    • Robert Spottswood, President of Spottswood Companies and Chair of the American Resort Development Association (ARDA)

    See the complete list of the FY2020 Roundtable’s Board of Directors here.

    Stepping down from The Roundtable Board as of July 1 are:

    • Tom Baltimore, Jr., Chairman, President & CEO of Park Hotels & Resorts, and Immediate Past Chair of Nareit
    • Steve Hason, Managing Director and Head of Americas Real Estate & Infrastructure with APG Asset Management US and Immediate Past Chair of PREA
    • David Neithercut, former President & CEO of Equity Residential

    Collectively, Real Estate Roundtable members’ portfolios contain over 12 billion square feet of office, retail and industrial properties valued at nearly $3 trillion; over 2 million apartment units; and in excess of 3 million hotel rooms. Participating trade associations represent more than 2 million people involved in virtually every aspect of the real estate business.

     

    #     #     #

    Roundtable Cautions Policymakers on Potential Economic Harm of New Duties on Fabricated Structural Steel Imports

    Posted on by Trey Jackson

    The Real Estate Roundtable this week urged Commerce Department Secretary Wilbur Ross to reject calls from domestic producers of fabricated structural steel (FSS) to change the rules governing how trade subsidies or dumping are calculated – and to consider how potential tariffs on FSS from Canada and Mexico could have a significant impact on jobs and growth in U.S. real estate.  ( Roundtable comment letter , June 27)

    Fabricated structural steel is a key material used in major real estate and infrastructure projects, including high-rise developments, bridges, and ports.
    • The Commerce Department, in conjunction with the U.S. International Trade Commission (USITC), is conducting an antidumping and countervailing duty investigation into imported FSS from Canada, China and Mexico.  (Commerce Department announcement, Feb. 26 and ITC initial report on FSS, March 2019) 
    • FSS is a key material used in major real estate and infrastructure projects, including high-rise developments, bridges, and ports. The Roundtable wrote to the USITC commissioners about the FSS issue in March, urging a cautious approach to the investigation and emphasizing the potential economic harm that new tariffs could cause.  (Roundtable comment letter, March 1) 
    • In March, the USITC found that U.S. imports of fabricated structural steel from the three identified countries are causing injury to U.S. domestic producers.  (Reuters, March 20, 2019) Commerce is now analyzing whether the imports are being dumped in the U.S. market at less than fair value and whether the foreign producers are receiving unfair government subsidies.  If Commerce makes an affirmative finding in either of these investigations, it will impose duties on the imports to offset the amount of dumping or unfair subsidization that is found to exist.    
    • In the June 27 letter, Roundtable President Jeffrey DeBoer states, “As these investigations proceed, it is critical that they are conducted in a fair and balanced manner with due allowance for the complexities of FSS markets.”  The letter requests that Commerce “reject calls from certain parties to change the rules for calculating subsidies or dumping, such as revising sales values for completed, erected projects.”  It also explains how a decision that leads to higher construction costs will have a negative effect on new development and construction activity in the United States.  
    • The letter reiterates The Roundtable’s view that if the USITC investigation proves unlawful or inappropriate dumping or subsidies of FSS are causing injury to U.S. businesses, then action to counter those unfair trade measures is warranted. 
    • In 2017, imports of fabricated structural steel from Canada, China, and Mexico were valued, in the aggregate, at more than $1.9 billion.  (Commerce Department Fact Sheet) 

    The preliminary ruling in the subsidies / countervailing duty case is due to be announced July 8 and the initial ruling in the dumping investigation is expected in September. 

    President Trump Establishes Council on Regulatory Barriers to Affordable Housing

    Posted on by Trey Jackson

    President Donald Trump signed an executive order Tuesday creating a White House Council on Eliminating Regulatory Barriers to Affordable Housing.  ( White House Executive Order , June 25).

      President Donald Trump signed an executive order Tuesday creating a White House Council on Eliminating Regulatory Barriers to Affordable Housing.   ( White House video  of the signing, June 25)  
    • Secretary of Housing and Urban Development (HUD) Ben Carson will chair the council, which will engage State, local, and tribal leaders to identify and remove obstacles that impede economic growth and the development of new affordable housing. (  White House video  of the signing, June 25)  
    • Carson told The Wall Street Journal this week, “These are things that can be solved. A lot of [these rules] have been on the books for excessive amounts of time. They’re not particularly relevant any more.” 
    • The council will include members from across eight Federal agencies who will analyze how Federal, State, and local regulations impact the costs of developing affordable housing and the economy.  It will also recommend ways to reduce regulatory burdens at all levels of government that hinder affordable housing development. (White House Fact Sheet, June 25)

    According to the White House:  

    • Regulations are creating excessive costs that are holding back the development of needed affordable housing. 
    • Many of the markets with the most severe shortages in affordable housing have the most restrictive State and local regulatory barriers to development.
    • More than 25% of the cost of a new home is the direct result of Federal, State, and local regulations, with the price tag even reaching up to 42% for some new multifamily construction.
    • High housing prices are a primary determinant of homelessness, and research has directly linked more stringent housing market regulation to higher homelessness rates.  
    • State and local law barriers identified in Trump’s Executive Order – that will be assessed by the Cabinet-level council – include overly restrictive zoning and environmental laws, rent regulations, excessive energy and water efficiency mandates, impediments to higher-density projects, time-consuming permit procedures, complex labor requirements, and inordinate development impact fees. 
    • “These regulatory barriers … are the leading factor in the growth of housing prices” and “drive down the supply of affordable housing” in markets across the United States, the Executive Order states.  

    The Real Estate Roundtable’s policy agenda likewise encourages government programs designed to increase the nation’s stock of affordable, low-income and market-rate housing, as opposed to rent control and other measures that constrict residential supplies.  (Roundtable Weekly, June 21)

    Senate Banking Committee Holds TRIA Hearing; Coalition to Insure Against Terrorism Urges Long-Term Reauthorization

    Posted on by Trey Jackson

    A hearing on The Reauthorization of the Terrorism Risk Insurance Program  before the Senate Banking Committee was held on June 18 as the Coalition to Insure Against Terrorism  (CIAT) – including The Real Estate Roundtable – submitted  comments  urging Congress to pass a long-term reauthorization of the Terrorism Risk Insurance Act (TRIA). 

    CIAT’s comment letter  to Chairman Mike Crapo (R-ID), above, and Ranking Member Sherrod Brown (D-OH) urges prompt congressional action for a long-term reauthorization of this critical program.
    • CIAT’s comment letter to Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH) urges prompt congressional action for a long-term reauthorization of this critical program.  The letter states, “At almost no cost to the taxpayer, the Program has been the key factor in ensuring that the private insurance market has remained intact and continues to meet the needs of commercial policyholders during the on-going threat of a future terrorist attack – all while minimizing federal taxpayer exposure.”   
    • Senate Banking Committee Chairman Michael Crapo (R-ID) discussed reauthorization of the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) at The Roundtable’s Spring Meeting in April.  (Roundtable Weekly, April 12).  The Committee’s Ranking Member, Sen. Sherrod Brown (D-MA), acknowledged the need to extend TRIA before its expiration at The Roundtable’s Annual Meeting on June 11 in Washington.  (Roundtable Weekly, June 14) 
    • Testifying before the committee, Marsh’s property terrorism placement and advisory leader Tarique Nageer noted that the expiration of TRIPRA without a replacement could create capacity shortfalls, especially for firms with “significant workers’ compensation accumulations. 
    • Nageer stated, “We are already seeing an impact on policies that extend beyond 2020, with some insurers either seemingly unwilling to offer terrorism coverage beyond the expiration of TRIPRA or seeking to increase prices to cover the additional risk to their portfolios. Without a decision to reauthorize or extend TRIPRA, we expect to see more sunset provisions in policies and higher costs as we get closer to December 31, 2020.” (Nageer’s testimony, June 18)

      Marsh’s 2019 Terrorism Risk Insurance Report 

    • Chairman Crapo stated that he anticipates additional “balanced reforms” to TRIA that “reduce taxpayer exposure” without substantially increasing costs or decreasing take-up rates.  His focus was on what changes are necessary based on data, not whether the program is needed.  Only two Republicans attended the hearing, whereas the Democrats in attendance voiced unified support of TRIA. (Senate Banking Committee hearing video, statements and testimony)
    • Chairman Crapo and Sen. Brown agreed that it was important that reauthorization take place sooner rather than later to ensure a lapse in coverage does not happen again.   Sen. Menendez (D-NJ) noted during the hearing that a lapse in 2014 created uncertainty, resulted in sunset clauses on policies, and increased costs on long-term construction deals.  A similar situation could begin as early as January 1, 2020.  
    • Additional hearings on TRIA are expected that would include policyholder and insurer witnesses and could address issues such as the length of another reauthorization and the scope of TRIA regarding cyber, nuclear, biological, chemical, and radiological risks. 

    A long-term authorization of TRIA continues to be a top policy priority of The Real Estate Roundtable.  (Capital and Credit sections of The Roundtable’s 2019 Policy Agenda and  FY2019 Annual Report) 

    Other Resources:

    # #  #

    New York Overhauls Rent Regulations as Affordable Housing Shortage Attracts National Attention

    Posted on by Trey Jackson

    Major changes to New York City’s rent regulations passed in Albany last week have drawn attention to a nationwide resurgence of rent control laws considered by cities and states across the nation.  ( Wall Street Journal , June 14).

    By keeping more New York City apartments permanently in the regulated system, the new law will diminish the number of available market-rate units, drive-up market-rate rents, and perpetuate an imbalance in affordable housing supply and demand.  
    • The law signed by Governor Andrew Cuomo on June 14 directly impacts about 40 percent of New York City’s apartment stock and expands rent stabilization to counties across the state.  The law generally freezes “stabilized” NYC apartments from ever moving to market rental rates.  (New York Times ,June 12 and June 17).  
    • By keeping more apartments permanently in the regulated system, the new law will diminish the number of available market-rate units, drive-up market-rate rents, and perpetuate an imbalance in affordable housing supply and demand.  Affluent Manhattan residents in stabilized apartments who enjoy a rental windfall will stay in place, while lower-income residents in outer boroughs will likely bear higher rent burdens.  (Wall Street Journal, June 12) 
    • The New York law also dis-incentivizes owners from modernizing aging housing with new roofs, boilers, security systems, and other improvements.  By capping annual rent increases that an owner can charge for major building-wide capital investments, one critic has warned that the law could lead to a “shabbification of rental housing.”  (Citylab, June 13). 
    • Real Estate Board of New York (REBNY) President John Banks stated, “The harmful impact of this legislation will be profound for New York City’s economic future … This legislation will keep rent lower for some, but also significantly diminish housing quality and lead to less tax revenue to pay for vital government services.”  (REBNY statement, June 18) 

    Affordable Housing: A National Issue

    New York’s action is part of a growing trend of jurisdictions purporting to address skyrocketing housing costs though rent regulations.  Meanwhile, candidates on the 2020 campaign trail are offering plans to address the nation’s “affordable housing crisis.”  ( NPR,  June 18)  

      An  interactive national map provided by the National Multifamily Housing Council (NMHC) details the movement of state capitals eying rent control measures.   
      • An interactive national map provided by the National Multifamily Housing Council (NMHC) details the movement of state capitals eying rent control measures.  
      • A real estate industry coalition recently opposed a rent control measure under consideration in California.  In a letter to Sacramento lawmakers, the coalition explained that increasing housing supplies with new construction built by public-private partnerships will “help bring the price point down,” and that it is “more effective to tie assistance to a renter rather than a rental unit.” (NMHC, June 17) 
      • Proposals in Congress that aim to expand and incentivize the construction of affordable housing would be more effective in addressing the nation’s housing challenges (compared to government-mandated rental price-fixing).  Recently proposed measures would expand the low-income housing tax credit program (e.g., S. 1703,  H.R. 3077), and create a similar tax credit geared to moderate-income, workforce housing (S. 3365, 115th Cong.). 
      • Housing and Urban Development Secretary Ben Carson has offered a strategy to boost affordable housing by encouraging localities to ease their own building restrictions. Carson’s proposal has gained support of House Financial Services Committee Chair Maxine Waters (D-CA).  It would provide federal monetary incentives for local governments to ease land-use and zoning regulatory barriers that can feed into “NIMBY-opposition” against affordable housing and drive-up development and construction costs. (Politico, June 14) 

      “Although they are well-intended, we know from decades of experience that rent control regulations distort markets, create shortages, and depress business investments.  They often harm the communities they seek to help,” said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. “Policy makers should avoid rent control measures and rather seek solutions that grow America’s residential stock, to enable our communities to provide safe and decent housing for low-income families and the teachers and first-responders in our workforce.”