Category: News

President Trump signed major bipartisan legislation today that allocates more than $2.7 trillion in discretionary federal spending over two years; suspends the debt ceiling until July 2021; and permanently eliminates the prospect of strict “sequestration”
spending caps imposed under the Budget Control Act of 2011. ( The Hill , Aug. 2) 

After passing the budget deal yesterday, the Senate left for summer recess, following the House’s exit last week.  Congress will reconvene on September 9.

• The legislation – a result of weeks of negotiations between Democratic congressional leaders and the White House – passed the Senate yesterday by a vote of 67-28 after the House last week approved it 284-149.  (Roundtable Weekly, July 26).  President Trump tweeted yesterday
  in support of the bill. 

• Senate Majority Leader Mitch McConnell (R-KY) yesterday commented on the bill: “In recent weeks, key officials on President Trump’s team engaged in extensive negotiations with Speaker Pelosi and the Democratic House.  Given the exigencies of
  divided government, we knew that any bipartisan agreement on funding levels would not appear perfect to either side. But the administration negotiated a strong deal.” (CNN,
  August 1) 

• Notably, the budget deal puts an end to the threat of sequestration, which would have imposed a mandatory 10 percent cut on all programs if budget targets were not met.  Senate Minority Leader Chuck Schumer (D-NY), said yesterday, “For too long,
  the arbitrary, draconian limits of sequester have hampered our ability to invest in working Americans and in our military readiness. This deal ends the threat of sequester permanently. That is huge.” (Schumer Floor Remarks, August
  1) 

• President Trump has indicated he wanted to eliminate budget brinkmanship in Washington that last year resulted in the longest partial government shutdown in U.S. history – while obtaining a two-year budget allocation until after the 2020
  presidential election.  (Wall Street Journal, August 1) 

• After passing the budget deal yesterday, the Senate left for summer recess, following the House’s exit last week.  Congress will reconvene on September 9. 

• Policymakers will face a tight deadline upon their return as they will need to set federal appropriations for individual agencies and departments for FY’20.  Current FY’19 funding runs out on September 30, as does legislative authority for the
  National Flood Insurance and EB-5 investment programs.  

If Congress and President Trump cannot agree on how to allocate the $1.37 trillion in discretionary money allotted for the new fiscal year beginning October 1, a stopgap funding measure (or “Continuing Resolution”) may be required.

The Senate Environment and Public Works Committee (EPW) unanimously approved a bill on Tuesday to authorize $287 billion over five years to repair and maintain the nation’s surface transportation.  The bipartisan measure also aims to expedite the
infrastructure permitting process, help address climate change, and grow the economy.  ( EPW Committee news release ,
July 30)  

The Roundtable on April 29 submitted  infrastructure policy recommendations  to House Committee on Transportation and Infrastructure Chairman Peter DeFazio (D-OR) and Ranking Member Sam Graves (R-MO  ).

• America’s Transportation Infrastructure Act of 2019 (ATIA, S. 2302) is not the comprehensive infrastructure overhaul that Republicans and Democrats
  have long sought. (Roundtable Weekly,May 3, 2019.)  However, it makes
  progress toward shoring-up the Highway Trust Fund (HTF) – the nation’s largest financing source for roads, bridges, tunnels, and mass transit.  Congress must reauthorize and capitalize the HTF before it runs out of money by the
  end of September 2020, at the height of the presidential election season. (ATIA summary and
  section-by-section analysis)  

• The ATIA would also codify Trump Administration measures to cut lengthy
  project permitting times.  EPW Chairman John Barrasso (R-WY) and Ranking Member Tom Carper (D-DE) stated their bill “will speed up project delivery by codifying key elements of the President’s ‘One Federal Decision’ policy,
  without forgoing important environmental protections. Cutting red tape will allow important highway infrastructure projects to be built quicker and smarter.”  (July 29 CNN joint op-ed)

• President Trump tweeted his support of S. 2302 on
  July 30, praising the EPW Committee’s 21-0 vote as a bipartisan achievement. 

• The bill now moves to the Finance Committee, chaired by Sen. Chuck Grassley (R-IA), to figure out how to pay for it through tax revenues and other means.  Additionally, the Senate Banking Committee, chaired by Mike Crapo (R-ID), must also mark-up
  sections dealing with mass transit programs.  The Senate’s No. 2 Republican, John Thune (R-SD), said funding the bill will be a “heavy lift” and that any broader infrastructure package is “really unlikely.”  (POLITICO Morning Transportation, Aug. 2)

• One financing source reportedly off-the-table is an increase to the “pay-at-the-pump” gas user fee that capitalizes the HTF.  Congress has not raised the so-called “gas tax” since 1993, and its buying power has been significantly diminished since
  then by inflation and gains in fuel efficiency.  Grassley said the Finance Committee will not consider how to pay for the ATIA until Senate Majority Leader Mitch McConnell (R-KY) “says he’s willing to let a gas tax increase on the floor.” 
  (BGov Tax, July 31)

• The Real Estate Roundtable’s infrastructure policy agenda recommends a responsible increase to the gas user fee to sustain the Highway Trust Fund for the long term;
  streamlined permitting goals; and support for infrastructure innovations (such as driverless and electric vehicles) that respond to the nation’s changing demographics and accommodate increased demands for transit-oriented development.

Roundtable President and CEO Jeffrey D. DeBoer discussed the role of public-private partnerships to develop infrastructure projects on  CNBC’s Squawk Box  in June 2017 .  ( Roundtable Weekly , June 9, 2017)  Congressional committees have also received statements from The Roundtable outlining our infrastructure priorities. ( Roundtable Weekly,   
May 3, 2019  and March 22, 2019 ).  

The House of Representatives on Wednesday passed legislation (H.R. 620) to reform the American With Disabilities Act (ADA) to curb unscrupulous lawsuits alleging minor and easily correctable impediments to building access.  

The House of Representatives on Feb. 14 passed legislation (  H.R. 620  ) to reform the American With Disabilities Act (ADA) to curb unscrupulous lawsuits alleging minor and easily correctable impediments to building access.

Approved by a 225-192 vote, The ADA Education and Reform Act (H.R. 620), attracted 12 Democratic votes to address the rise in so-called “drive-by” lawsuits where disabled individuals never actually seek access to properties that are allegedly ADA non-compliant.  A 60 Minutes  segment in 2017 reported on lawyers filing ADA complaints simply after driving by a business or reviewing properties online via Google Earth.  Many business owners subjected to such “drive-by” ADA claims have found it less costly to settle complaints and avoid the litigation process. (International Council of Shopping Centers, ADA Lawsuit Reform) 

Under H.R. 620, individuals intent on suing hotels, restaurants or other businesses over an ADA violation must first give the business 60 days to address specific complaints, detailed in an initial written notice, about physical barriers that prevent access or otherwise discriminate against disabled customers. Before a law suit can be filed, another 60 days must be allowed for the business to make “substantial progress” toward remedying the problem. (Washington Post and BNA, Feb. 15) 

House Judiciary Committee Chairman Bob Goodlatte (R-VA) noted, “All this bill does is require those unscrupulous trial lawyers to do what ethical lawyers already do: give fair notice of a violation before thousands of dollars in attorneys’ fees are racked up against a small business, diverting money from accessibility where it belongs,” Goodlatte said.  (The Hill, Feb. 15, 2018) 

Tom McGee, president and CEO of the International Council of Shopping Centers (ICSC), applauded policymakers for “ensuring that the landmark [ADA] continues to protect disabled people from discrimination in their everyday life – from employment to accessing public places.  The retail real estate industry is fully committed to the collective goals of more accessibility and ensuring fair compliance with this important law,” he said.  (Roundtable Weekly, Sept 8, 2017) 

ICSC and other real estate groups intend to pursue a strategy to pass ADA litigation reform in the Senate in the coming months.

The Senate on Wednesday passed (67-31) bipartisan Dodd-Frank reform legislation (S. 2155) that includes a Roundtable-supported measure to reform the Basel III High Volatility Commercial Real Estate (HVCRE) Rule, which would clarify specific requirements for acquisition, development, or construction (ADC) loans.

The  Senate bill , crafted by Banking Committee Chairman Mike Crapo, represents the most significant change to financial regulatory law since 2010.

The HVCRE measure included in the Economic Growth, Regulatory Relief, and Consumer Protection Act originated in the U.S. House of Representatives as the Clarifying Commercial Real Estate Loans bill (H.R. 2148) – introduced by House Financial Services Committee members Rep. Robert Pittenger (R-NC) and Rep. David Scott (D-GA).  An identical measure in the Senate – S. 2405 – co-sponsored by Senators Tom Cotton (R-AR) and Doug Jones (D-AL), was taken up in February by the Senate Banking Committee. 

With S. 2405 included in the larger Senate bill, crucial clarifications to the HVCRE Rule now move forward to the House.  The current, overly broad Rule would be modified by providing bank lenders with more specific requirements for acquisition, development, or construction (ADC) loans. These reforms to HVCRE loan definitions would provide greater assurances for performing loan portfolios with low risk, bolster credit capacity and preserve economically responsible commercial real estate lending. (Roundtable Weekly, Jan. 12). 

HVCRE reform has been a top policy priority of The Real Estate Roundtable and its industry coalition partners, who have submitted numerous policy comment letters to policymakers since 2015. The Roundtable’s HVCRE Working Group has also played a key role in advancing these specific reforms. (Roundtable letter, March 2) 

The Senate bill, crafted by Banking Committee Chairman Mike Crapo, represents the most significant change to financial regulatory law since 2010.  It raises the amount at which banks are considered “too big to fail” – from the current $50 billion threshold to $250 billion – while providing additional relief for community banks and credit unions. 

The Roundtable and twelve other real estate organizations recently sent a  comment letter urging that the HVCRE measure (S. 2405) be included in the broader Dodd-Frank reform package (S. 2155).

The bill also exempts banks with assets valued at less than $10 billion from the “Volcker Rule,” which prohibits banking agencies from engaging in proprietary trading or entering into certain relationships with hedge funds and private-equity funds. Certain banks are also exempted from specified capital and leverage ratios, with federal banking agencies directed to develop new requirements. 

Onward to the House 

The Senate legislation faces significant challenges next week in the House, which passed the Financial CHOICE Act (H.R. 10) in June with more far-reaching revisions to Dodd-Frank. 

House Financial Services Committee Chairman Jeb Hensarling (R-TX) has identified approximately 30 additional House bills he would like to see attached to the Senate deal, which could jeopardize the support of Senate moderates.  (Bloomberg, March 15) 

Hensarling yesterday said that House Speaker Paul Ryan (R-WI) promised that no action will be taken on the Senate’s Dodd-Frank rollback until members from both chambers meet to negotiate.  “It is a little presumptuous or naïve that the House would not expect to enter into a negotiation with the Senate,” Hensarling said. “Some seem to be under the impression that we are going to vote on their bill.”  (BNA, March 15) 

According to a White House statement immediately following passage of the Senate bill, “The President looks forward to discussing any further revisions the House is interested in making, with the goal of bipartisan, pro-growth Dodd-Frank relief reaching his desk as soon as possible.” 

Negotiations between House members, and between the two chambers, will begin in earnest next week, prior to the two-week Easter recess scheduled for the end of the month.

As landmark tax reform enacted last December begins to reverberate through the economy, economists, Congress and industry experts are starting to assess its impact on economic investment and commercial real estate.

The House Ways and Means Committee plans to hold a  series of hearings  on the Tax Cuts and Jobs Act (TCJA) impact on job creation and the economy starting May 16.

• The House Ways and Means Committee plans to hold a series of hearings on the  Tax Cuts and Jobs Act (TCJA) impact on job creation and the economy starting May 16.  
• Ways and Means Chairman Brady: “It is exciting to see tax reform boosting our economy and giving families and workers across the country the relief they deserve. Wages are growing at their fastest pace in 10 years, unemployment claims are at their lowest since the 1960s, and Main Street businesses are expanding like never before.”  (Ways and Means Advisory, May 9)

TCJA & Economic Investment:
New data shows tax reform is resulting in more capital investment and expenditures. 

• Trump Tax Windfall Going to Capex Way Faster Than Stock Buybacks, Bloomberg (April 16) – Capital spending increased by 39 percent in S&P 500 companies, the fastest rate in seven years. 

Cycle Watch: U.S. Economic Expansion Reaches Historic Point,  Cushman & Wakefield(May 1)

• US Groups Plough Tax Cash into Capex Ahead of Investors, Financial Times (May 1) – “The median S&P 500 company expanded its investment spending by a more modest 13 per cent year on year, according to Bank of America. … Analysts have been surprised to see the growth in capital spending among S&P 500 companies outstrip the increases in buybacks and dividends.” 

• Cycle Watch: U.S. Economic Expansion Reaches Historic Point, Cushman & Wakefield (May 1) – On July 1, 2019, the current (economic) expansion may become the longest in U.S. history. “Current estimates of the probability of a recession within the next 12 months are between 0-25%. A majority of forecasters have predictions between 10-15%. Tailwinds from fiscal stimulus and the revival of emerging markets as a global growth engine bode well for the economy in the near-term.”

TCJA’s Positive Impact on Commercial Real Estate: 

• The Impact of Tax Reform by Peter Linneman, Commercial Property Executive (May 2) – “… Tax reform legislation is neutral to positive for commercial real estate and very positive for the economy in general.  Because the changes to commercial real estate are not dramatic, most investors should feel fairly confident.” 
• Marcus & Millichap CEO Hessam Nadji interview ,  Fox Business  (May 1) – “The tax reform was very favorable, not just for corporations but also for commercial real estate investing. For over 50 years, the American Dream has been centered around real estate ownership, which was home ownership. That’s shifting towards renting and investing in commercial real estate in the form of small apartments or small office buildings or shopping centers – and the tax reform really made that a lot more favorable.

The Impact of Tax Reform  by Peter Linneman, Commercial Property Executive (May 2) – “… Tax reform legislation is neutral to positive for commercial real estate and very positive for the economy in general.  Because the changes to commercial real estate are not dramatic, most investors should feel fairly confident.”

• Investors Find Confidence Thanks to U.S. Tax Reform, Hotel Management (April 30) – “According to the firm’s NREI/Marcus & Millichap Investor Sentiment Survey from the first half of the year, the Investor Sentiment Index grew to 163. …[D]ue to tax-law changes, 68 percent of survey respondents said that they expect the economy to grow faster. Meanwhile, 71 percent said that tax reform will have a favorable impact on commercial real estate.” 

• U.S. Apartment Investment Market to Enjoy Boost From New Tax Plan, World Property Journal (May 11) – “According to a new report by CBRE that analyzed the implications of tax reform on the multifamily sector in the largest 35 U.S. property markets, the recently enacted U.S. tax reform is poised to benefit the U.S. multifamily investment market.”  

• Commercial Real Estate: A Clear Winner From Tax Reform, Clarion Partners (March 2018) – “Tax reform will likely raise consumer spending, employment levels, business investment, and wage growth … interest rates will likely stay low over the long‐term due to the deflationary pressures associated with the global  savings  glut,  ongoing  technological  innovation,  and  weakening demographic trends.” 

• The Budget and Economic Outlook: 2018 to 2028, Congressional Budget Office (April 9) – CBO projects that tax reform will spur investment in nonresidential structures to increase by an average of more than $23 billion from 2019-2028, and rise nearly $10 billion this year alone.  (Roundtable Weekly, April 13) 

Along with TCJA rulemaking and implementation, the legislation’s impact on CRE will be a focus of discussion at The Roundtable’s Annual Business Meeting and Policy Advisory Committee Meetings on June 14-15 in Washington, DC