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The Roundtable’s policy news digest will resume publication on Friday, January 10, 2025
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News Type: Roundtable Weekly
Property Conversions Unlock New Potential in Real Estate
Property conversions are emerging as a critical tool to revive underutilized assets and address market demands. By transforming outdated office spaces into housing and mixed-use developments, the industry is seizing an opportunity to adapt and thrive.
Industry Voices Capture Momentum
- These strategies offer a blueprint for addressing nationwide housing shortages, while revitalizing communities and modernizing infrastructure.
- Former RER Chair Dan Neidich (CEO, Dune Real Estate Partners) likens the opportunities in office-to-residential conversions to a “fire hose,” emphasizing the urgency and scale of adapting underperforming spaces. (CNBC, Dec. 10)
- RER Board Member Scott Rechler (Chairman & CEO, RXR) highlights that in New York, “70% of the vacancy is in 30% of the buildings,” indicating a concentration of underutilized office space prime for conversion. (CNBC Squawk Box, Nov. 22)
- According to a recent CBRE report, 73 U.S. conversion projects have been completed this year, a slight increase from last year.
- Looking forward, another 309 projects are planned or underway, with about 75% categorized as office-to-residential, placing the total count of units in the works at 38,000. (Wall Street Journal, Nov. 26)
Community Success Stories
- New York City recently approved the “City of Yes” plan to create 80,000 new homes through adaptive reuse. NYC real estate leaders have supported this effort to streamline zoning and enable housing development, including RER Board Member Scott Rechler, who spoke in favor of the proposal on an NYU panel. (New York Times, Dec. 5 | Bisnow, Dec. 6)
- In cities such as Columbus, St. Louis, and Pittsburgh across the Midwest, developers are converting outdated office spaces into vibrant residential communities and mixed-use developments, fostering neighborhood and downtown revitalization. (Business Journal, Dec. 3)
- 2024 CommercialEdge research outlines New York City, San Francisco, Chicago, and Los Angeles as top cities with conversion feasible office space. The analysis shows that conversion in the top “30 central business districts and surrounding urban segments alone could mean turning roughly 167 million square feet of aging office space into modern residential and mixed-use properties.” (CommercialCafe, Dec. 10)
Navigating Challenges
- Financing gaps, structural challenges, and community concerns remain significant hurdles for conversion projects. Regulatory obstacles such as outdated building codes, minimum unit sizes, and natural light requirements continue to increase costs of development. (Governing, Dec. 3)
- Recognizing the need for change, cities are taking steps to encourage property conversions. Methods include reductions in approval times, exemptions from affordable housing rules, changes in building code requirements, and tax incentives or subsidies to developers. (Governing, Dec. 3)
The Roundtable urges federal policymakers to adopt incentives that support and promote these transformative local projects. These measures are vital to expanding access to affordable housing and meeting the nation’s growing demand.
Rep. French Hill to Chair Powerful House Financial Services Committee
Rep. French Hill (R-AR) was selected as the next chair of the powerful House Financial Services Committee, after securing the endorsement of the GOP steering committee in a closely watched race. (Axios, Dec. 12) (PoliticoPro, Dec.13)
Financial Policy Priorities
- The House Financial Services Committee holds broad jurisdiction over monetary policy, housing, banking, and international finance. (Axios, Dec. 12)
- As chair, Rep. Hill will play a vital role in shaping financial policy and working with President-elect Trump’s administration on priorities like banking oversight, GSE reform and cryptocurrency regulation.
- In an interview with CNBC, Rep. Hill said his top priorities as chair are making community and commercial banking more competitive by rolling back rules, removing limits on investing to make it easier for companies to become publicly traded, and overhauling cryptocurrency regulation. (CNBC, Dec. 13) (PoliticoPro, Dec.13)
- A former banker, Rep. Hill brings a wealth of experience to the role, having served as Financial Services vice chair and leader of the committee’s digital assets subcommittee.
- Rep. Hill has advocated for several Roundtable priorities, including affordable housing measures, expanding capital formation, GSE reform, reauthorization of the National Flood Insurance Program, and terrorism risk insurance.
Trump Administration Eyes Changes to Financial Regulation
- President-elect Trump advisers and officials from the newly founded Department of Government Efficiency (DOGE) are exploring ways to consolidate or eliminate major bank regulators, including potentially abolishing the FDIC and transferring deposit insurance to the Treasury Department, according to people familiar with the matter. (WSJ, Dec. 12)
- Such proposals, which would require congressional approval, mark a dramatic shift in federal oversight, though no major cabinet-level agency or regulatory body like the FDIC has ever been shuttered in Washington’s history. (Reuters, Dec. 13)
Looking Ahead
- Rep. Hill has proposed initiatives to streamline financial regulations, create a “chief economist” role within the committee, and enhance member communication on financial policy issues. (The Hill, Dec. 12)
- Rep. Maxine Waters (D-CA) will continue to serve as Ranking Democrat of the committee. (Politico, Dec. 12)
- Whether the Trump administration’s bold proposals to restructure federal regulators gain traction remains uncertain, but Rep. Hill’s experience and focus on pragmatic policy solutions could provide a steady hand in this transformative period for U.S. financial services.
The House Republican Conference is anticipated to ratify the steering committee’s selection in the coming days.
GOP Leaders Debate Strategy for Reconciliation in 2025
Republicans are divided on how to approach a sweeping legislative package in 2025, as debates intensify between House and Senate GOP leaders considering whether to consolidate tax, border security, energy, and defense priorities into a single reconciliation bill or pursue a two-step approach. (TaxNotes, Dec. 12)
The Debate
- The outcome will shape the GOP’s legislative strategy as they prepare to extend key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and deliver on other campaign promises.
- House Ways and Means Committee Chair Jason Smith (R-MO) is advocating for a single reconciliation bill that combines tax policy with border and energy reforms, arguing that this approach maximizes the slim Republican majority’s ability to pass ambitious legislation.
- Rep. Smith’s stance has put him at odds with incoming Senate Majority Leader John Thune (R-SD), who prefers a two-bill strategy—one focused on border security and energy early in the year, followed by a tax package later. (PoliticoPro, Dec. 11)
- Sen. Thune, backed by Senate Budget Chair Lindsey Graham (R-SC) and incoming White House policy advisor Stephen Miller, see an early legislative win on immigration as critical to setting the stage for more complex tax negotiations. (Axios, Dec. 9)
- Rep. Smith, contends that splitting the package could jeopardize tax policy priorities, including extensions of TCJA provisions set to expire at the end of 2025. (Roundtable Weekly, Dec. 6)
- Failure to act on tax reform by the end of 2025 will lead to the expiration of many provisions of the 2017 tax law, resulting in tax increases for most individuals and some businesses. (Bloomberg, Dec. 3)
View from the Senate
- While negotiations continue, Sen. Thune said he’s eyeing a “big early win” for President-elect Trump with a party-line push on border security, military and energy provisions. “Failure is not an option as far as tax is concerned.” (Politico, Dec. 11)
View from the House
- House Majority Leader Steve Scalise (R-LA) said Tuesday House leadership is still deciding on a one- or two-bill strategy, and that they have been meeting with House and Senate members, including Sen. Thune and incoming Senate Finance Committee Chair Mike Crapo (R-ID). He warned it would be challenging to pass multiple budget resolutions. (TaxNotes, Dec. 11)
- “Donald Trump is the whip right now,” Scalise said, describing how Trump would corral votes from House Republicans. “You don’t have to worry about me; I’m actually a nice guy. The guy at 1600 Pennsylvania is going to send out a tweet, a truth, or whatever, and it’s not going to be as nice.” (TaxNotes, Dec. 11)
Government Funding
- Members on both sides of the aisle expect the government will stay open past the Dec. 20 shutdown deadline. (GlobeSt. Dec. 11)
- Lawmakers anticipate leadership will settle on a stopgap measure extending through next March, though some Republicans in both chambers are advocating for a CR that ends sooner to expedite Congress’s funding work. (The Hill, Dec. 11).
Challenges Ahead
- Narrow majorities: House Republicans can only afford to lose a handful of votes, making consensus critical. Senate Republicans face their own challenges under reconciliation rules requiring compliance with strict budget parameters. (NBC News, Dec. 12)
- SALT deduction disputes: Republicans from high-tax states like New York and New Jersey are expected to push for raising the $10,000 cap on state and local tax (SALT) deductions, which could complicate efforts to unify the caucus.
- Economist Stephen Moore, a member of President-elect Trump’s economic advisory transition team, told Bloomberg that expanding the tax write-off limit from $10,000 to $20,000 has been discussed. (TaxNotes, Dec. 11 | Bloomberg, Dec. 12)
What’s Next
- House Speaker Mike Johnson (R-LA) faces mounting pressure to navigate the narrow majority and align the party’s legislative strategy with President-elect Trump’s priorities.
- Johnson has indicated flexibility in the approach, noting ongoing discussions with Trump and GOP leaders.
- House Republicans are preparing to move swiftly in early January, with Budget Committee Chair Jodey Arrington (R-Texas) leading efforts on a budget resolution to lay the groundwork for reconciliation. Arrington has emphasized the need for a streamlined process, warning that delays could jeopardize Republican priorities. (TaxNotes, Dec. 12)
- Passage of a budget resolution, which is the first key step in the reconciliation process, will be crucial to move forward—a challenge in itself given the slim GOP majority in the House.
The text of the funding bill is anticipated to be released over the weekend or early next week, enabling both chambers to pass the measure before lawmakers adjourn until January.
Real Estate Coalition Supports Affordable Housing Legislation
On Tuesday, a coalition of national real estate associations, including The Real Estate Roundtable (RER), wrote to Congress urging support for the Renewing Opportunity in the American Dream to Housing Act (ROAD) to Housing Act, (S. 5027 | H.R. 990). Introduced by Senator Tim Scott (R-SC) and Representative French Hill (R-AR), this comprehensive legislation aims to make housing more affordable and widely available. (Letter, Dec. 10)
Addressing Housing Affordability
- The nation faces a persistent housing affordability crisis rooted in a critical shortage of supply. Addressing this challenge requires bipartisan solutions that foster collaboration across government agencies, industry stakeholders, and policymakers.
- The coalition praised the bill as “a step forward in addressing the root cause of housing affordability challenges—supply shortages.” (Letter, Dec. 10)
- The key pillars of the bill are increasing access to affordable housing, promoting opportunity, incentivizing local solutions, and ensuring proper oversight and accountability over federal housing programs. (Sen. Scott Press Release, Sept. 12)
- Rep. French Hill (R-AR) said, “With the ROAD to Housing Act, we are taking real steps toward creating a housing market that benefits everyone—renters, homeowners, and families striving for stability. I thank my friend Senator Tim Scott for spearheading this legislation in the Senate.” (Rep. Hill Press Release, Oct. 15)
- The letter emphasized the importance of bipartisan collaboration in crafting sustainable, effective housing policy solutions.
ROAD to Housing Act
- The ROAD to Housing Act introduces targeted reforms and initiatives, including:
- Enhanced financial literacy and housing counseling: Empowering individuals with tools to navigate homeownership and rental markets.
- HUD’s Moving to Work (MTW) program: Fully authorizing this initiative to improve housing outcomes for low-income families. The MTW program helps public housing authorities and agencies implement innovative solutions that support affordable housing goals
- Boosting affordable housing construction: Encouraging development through construction grants and support for small-dollar mortgage lending.
- Opportunity Zones focus: Promoting affordable housing projects in designated Opportunity Zones to drive investment in underserved areas.
- Federal coordination: Establishing regular dialogue between federal agencies and Congress to align housing policies with on-the-ground needs.
The Roundtable and its coalition partners will continue to educate and collaborate with policymakers to advance the ROAD to Housing Act and ensure that housing supply and affordability remain top priorities.
Outlook for 2025 Budget, Reconciliation, and Tax Legislation
Senate Republicans are mapping out an ambitious two-step reconciliation strategy for 2025, planning to first address defense, energy, and border security before tackling a tax package later in the year. The initial focus is to secure an early win that could help build momentum for the more complex task of extending the expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA). (Tax Notes, Dec. 4)
Why It Matters
- This approach marks a notable shift from House Republicans’ earlier plan to address tax issues within the first 100 days of President-elect Trump’s term. (Washington Post, Dec. 4)
- Instead, Senate Republicans want to divide the legislative work to make each package more manageable, leveraging early victories to build momentum for harder battles. (PoliticoPro, Dec. 4)
Reconciliation Plan
- GOP senators, including Thom Tillis (R-NC) and Shelley Moore Capito (R-WV), emphasized the importance of consensus and coordination within the party, acknowledging that a slim House majority could complicate passage. (Tax Notes, Dec. 4)
- Sen. Capito noted that a smaller, earlier reconciliation package—focused on defense, energy, and border security—could help set the stage for tackling the more politically challenging tax bill.
- The initial bill could include measures that all Republican factions can support, such as limited deficit reduction and targeted energy policy reforms.
- Failure to act on tax reform by the end of 2025 will lead to the expiration of many provisions from the 2017 tax law, resulting in tax increases for most individuals and some businesses. (Bloomberg, Dec. 3)
- Rep. Jason Smith (R-MO), chairman of the House’s Ways and Means committee, voiced his opposition to delaying tax reform under Sen. Thune’s plan, noting the difficulty of advancing two budget reconciliation packages, which are immune to filibusters in the Senate. (The Hill. Dec. 5 | CNBC, Dec. 4)
- “The important thing is getting all the policies done as quickly as possible, and what we ultimately all agree on [is] we’re all going to have to be in unison on that, but no final decision has been made,” said House Majority Leader Steve Scalise (R-LA) regarding the reconciliation timeline. (PoliticoPro, Dec. 4)
View from Senate
- Sen. Chuck Grassley (R-IA) pointed to the complexity of the tax package as the reason for its placement as the second bill.
- “We want to help lower energy costs, we want to help the military. We want to hit the ground running,” said Sen. Lindsey Graham (R-SC). (The Hill, Dec. 4)
- Sen. Rand Paul (R-KY) cautioned against using reconciliation to increase spending, emphasizing the need to reduce overall expenditures.
What’s Next
- Senate Republicans, led by incoming Senate Majority Leader John Thune (R-SD), will work closely with House Speaker Mike Johnson (R-LA) and the White House to finalize the contents and timing of both reconciliation bills.
- Passage of a budget resolution, which is the first key step in the reconciliation process, will be crucial to move forward—a challenge in itself given the slim GOP majority in the House.
The two-bill reconciliation strategy reflects Senate Republicans’ cautious approach to the legislative calendar. By securing an earlier, more straightforward win, the GOP hopes to gain the momentum needed to navigate a complex tax debate later in 2025.
The Roundtable’s Jeffrey DeBoer Recognized as One of DC’s “Top Lobbyists” for 2024
Real Estate Roundtable President and CEO Jeffrey DeBoer has been recognized as one of the “Top Lobbyists” in Washington, D.C. for 2024, according to the prominent policy news publication, The Hill. This marks the seventh consecutive year that DeBoer has received this honor. (The Hill, Dec. 5)
- The Hill noted that their list details “some of the best in the business and those that have been “go-to advocates during a year defined by unprecedented political events, legislative logjams, federal spending cut crusades and big rulemaking swings by the outgoing Biden administration.”
- DeBoer stated, “I am truly honored to be recognized by The Hill for my work, especially in a city with more than 12,000 lobbyists. This recognition, though, really is a testament to the overall Roundtable team, leadership, and membership.”
DeBoer added, “This acknowledgment underscores the importance of the fact-based advocacy work we do to advance policies that foster solid real estate asset values, spur job opportunities, economic growth and strengthen communities nationwide.”
Corporate Transparency Act Enforcement Blocked by Federal Court
On Tuesday, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, blocking enforcement of the Corporate Transparency Act (CTA), questioning its constitutionality and its impact on small businesses. The ruling prevents the federal government from enforcing CTA requirements until further notice. (Forbes, Dec. 4)
Impact of Ruling
- The CTA, effective January 1, 2024, mandates that over 32 million “reporting companies” disclose beneficial ownership information to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
- Due to the far-reaching scope of the CTA, The Roundtable has long raised concerns about the regulatory burden and cost the CTA would impose on many commercial and residential real estate investment businesses.
- The preliminary injunction halts enforcement of the upcoming January 1, 2025, deadline for filing ownership reports.
- The decision marked the second time a judge has deemed the law unconstitutional. An Alabama federal judge reached a similar conclusion in March (Reuters, Dec. 4 | Roundtable Weekly, March 8)
- The injunction is temporary; not a final decision. The pause on enforcement could be overturned if the ruling is challenged successfully on appeal.
Court’s Decision
- In Texas Top Cop Shop v Garland et al., Judge Amos L. Mazzant III found the CTA’s federal oversight of corporate ownership to be overreaching, infringing on constitutional rights typically overseen by states. (Bloomberg, Dec. 3)
- Judge Mazzant also highlighted the heavy compliance costs — projected at $22 billion in the first year alone — without adequate privacy safeguards.
- The plaintiffs, including small business owners and a trade association, argued that the CTA compels speech and association, infringing on First Amendment protections. They also raised concerns about privacy violations under the Fourth Amendment, given the extensive personal information required.
- The Court agreed that a nationwide injunction was necessary due to the sweeping impact of the CTA.
Roundtable Opposition
- The Roundtable has consistently opposed beneficial ownership rules under the CTA, the burdensome reporting requirements, and the negative impact on real estate partnerships and capital formation.
- In May, The Roundtable and more than 100 business organizations expressed strong support for bicameral legislation that would repeal the Corporate Transparency Act (CTA) and its onerous beneficial ownership burdens. (Roundtable Weekly, May 10)
- RER continues to work with policymakers to identify a balanced position that would inhibit illicit money laundering activity but would not place unnecessary compliance costs and regulatory burdens on the real estate industry. (Roundtable Weekly, June 7 )
The Roundtable’s Real Estate Capital Advisory Committee (RECPAC) will continue to closely monitor developments related to the enforcement of the CTA and challenges to the law.
Trump Tariffs Could Impact Housing Affordability
On Monday, President-elect Donald Trump pledged to impose a 25 percent tariff on all goods from Mexico and Canada, and an additional 10 percent tariff on imports from China. These measures could have significant repercussions for the U.S. economy, including housing affordability. (WSJ, Nov. 25 | Reuters, Nov. 26)
Response to Illegal Drugs, Immigration
- Trump’s social media posts stated that the threatened tariffs are necessary to stop illegal immigration and fentanyl trafficking. He couched the levies on imports as temporary, staying in effect “until drugs and migrants stopped coming over the border.” (New York Times, Nov. 26)
- The U.S. imports the most goods from Mexico, China, and Canada, in that order. (U.S. Census Bureau, Sept. 2024).
- Trump said he plans to impose the new tariffs on his first day in office. (AP, Nov. 26). Mexico, the U.S.’s largest export partner after Canada, vowed to retaliate with its own tariffs and spark a possible trade war. (Washington Post, Nov. 26)
Potential Impacts on Housing, Construction
- “Overly broad and poorly designed tariffs could unintentionally increase housing costs for millions of renters and home buyers,” said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. “Building safe and desirable housing cost-effectively is tied closely to the price of imported materials like steel, cement, concrete, lumber, glass, and more. Tariffs that increase construction costs would slow bringing new supplies to the market and increase prices to purchase and rent homes.”
- “We need to boost the nation’s housing supply — through new construction, converting obsolete buildings, strengthening the low-income housing tax incentive, reforming local zoning laws, and other bipartisan strategies,” DeBoer continued. “We look forward to working with the Trump Administration on policies to spur economic growth, create jobs, and in this case, improve housing affordability and availability.”
- About 32 percent of building materials are imported, largely from China, Germany, and South Korea. The extent of these imports has increased dramatically in recent years.
- The proposed tariffs would be additional to Biden-era tariffs, which themselves derive from import taxes dating back to the first Trump Administration.
- For example, in May, President Biden increased the tariff on steel products from China to 25 percent— while also increasing tariffs to varying degrees on semiconductors, solar panels, batteries and other specific Chinese imports. (White House fact sheet, May 14). It appears that President-elect Trump will seek an additional 10 percent on top of these.
- Similarly, in August, President Biden raised tariffs on imports of Canadian softwood lumber to 14.54 percent, according to the National Association of Home Builders (NAHB). It appears that President-elect Trump plans to raise this import tax further to 25 percent.
- Lumber tariffs have a detrimental impact on housing affordability, according to NAHB. “In effect, the lumber tariffs act as a tax on American businesses, home buyers, and consumers.”
Potential Impacts on the Broader Economy
- Investor Uncertainty: Uncertainty surrounding trade policies risks dampening investor confidence, which could weigh on real estate property values and slow transaction activity. (Bisnow, Nov. 24)
- Energy costs: A 25 percent tariff on all imports from Canada would drive up energy costs. Canada is the top external supplier of crude oil to the U.S., with oil, gas, and other energy products making up its largest exports. (Bloomberg, Nov. 26)
Trump did not specify how he plans to impose the tariffs, although many have expected him to rely heavily on the International Emergency Economic Powers Act. That law gives the president broad authority to regulate U.S. commerce after declaring a national emergency. (PoliticoPro, Nov. 24)
View from the CEO: Priorities for the CRE Industry in 2025
With control over the White House and both chambers of Congress decided, attention has turned to how President-elect Donald Trump’s second term will affect the commercial real estate industry.
Looking Ahead
- As Roundtable President & CEO Jeff DeBoer noted to BisNow last week, the new administration represents a chance to strengthen policymakers’ understanding of the critical role CRE plays in the economy. (BisNow, Nov. 12)
- “Anytime that there’s a turning of the page, there’s an opportunity to emphasize new issues, or to bring priority to older issues that maybe have been pushed out by previous leaders,” DeBoer told BisNow. DeBoer also highlighted key policy priorities for commercial real estate to move forward in the coming administration, including housing, tax, capital markets, and energy.
Housing Policy
- Interagency task force: The Roundtable is calling for a federal task force focused on expanding the housing supply, particularly affordable housing. This task force would coordinate efforts across agencies to streamline building processes and reduce regulatory barriers, incentivizing new development across the U.S.
- Property conversions: The administration should support federal incentives for (such as low interest loans) converting obsolete office buildings into residential housing. Modeled after tax credits for historic preservation, bipartisan legislation like the Revitalizing Downtowns and Main Streets Act could help relieve the national housing shortage. (Roundtable Weekly, July 12)
- Tariff concerns: Proposed tariffs on materials like lumber, steel, concrete, glass and appliances could impact housing supply: “By putting tariffs on housing materials, you will be indirectly increasing costs for buyers and renters and making it more difficult to solve this housing crisis,” said DeBoer.
Tax Policy
- With key provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) expiring soon, tax legislation will likely be central to President-elect Trump’s first 100 days.
- Capital gains: Long-standing elements of the tax code, including the reduced rate for capital gains, the ability to reinvest through like-kind exchanges, and step-up in basis of assets at death, are critical for real estate businesses and encourage productive investment and economic growth. RER will continue to advocate that these provisions be maintained.
- Section 199A: The qualified business income deduction for pass-through businesses, known as Section 199A, ensures that small businesses can compete on a level playing field with public corporations. RER supports extending the deduction, which is currently set to expire.
- Foreign investment: Restrictions on foreign investment discourage capital formation and could hinder growth in real estate at a time when increasing the supply and availability of capital is critical to the industry’s recovery. Policymakers should avoid imposing additional restrictions or tax burdens on foreign investors, and consider repealing or reforming the Foreign Investment in Real Property Tax Act (FIRPTA).
Capital Markets
- Strengthening capital flows in real estate is a top priority, as lending and credit availability have remained relatively weak since the pandemic and are only recently starting to see improvement.
- Interest rates: Policymakers should carefully consider the inflationary effects of fiscal policies to maintain a favorable interest rate environment. Avoiding increased capital requirements, such as Basel III Endgame proposal, is also necessary to prevent hindering growth.
Energy Policy
- With the rise of data centers, AI and other energy-intensive sectors, addressing energy capacity and permitting is a critical bipartisan need and “very important” to RER’s agenda, as DeBoer noted.
- See the story immediately below for more details.
RER is committed to working proactively and productively with President-elect Trump and the 119th Congress to support the needs of the economy and commercial real estate industry.