News Type: Roundtable Weekly

GAO Reports All Federal Agencies at Less Than 50 Percent Occupancy

Posted on by Trey Jackson
Government Accountability Office

More than half of the federal workforce is not working in their agency offices, according to the Government Accountability Office (GAO). Sen. Joni Ernst (R-IA) released a list this week based on the GAO data that shows federal space utilization percentages range from a low of 7% to 49% with most agencies using less than 30%. (Agency list | Sen. Ernst news release | DailyMail, Dec. 6)

Federal Employees’ Return to Office

  • The GAO statistics released by Sen. Ernst, the Ranking Member of the Senate Small Business & Entrepreneurship Committee, covers 24 agencies for one week between January and March 2023. Sen. Ernst told Federal News Network this week that she is pushing the federal government to get workers back to their offices or sell their unused space.
  • In August, Ernst demanded investigations into federal departments and agencies to determine the impact of telework on the delivery and response times of government services. That same month, White House Chief of Staff Jeff Zients directed cabinet officials to increase the return of federal employees to their offices. (Federal News Network, Nov. 30 | (Government Executive, Aug. 7 | Roundtable Weekly, Aug. 11)
  • Since the pandemic, Congress has held multiple hearings and introduced legislation in both the House and Senate about the government’s remote work policies. (Roundtable Weekly, Dec. 1)
  • The General Services Administration’s (GSA) Robin Carnahan recently told the House Committee on Oversight and Accountability that her agency sees an opportunity to reduce the government’s real-estate footprint by up to 30% in the coming years. (Federal News Network, Nov. 14)

Roundtable Response

  • RER Chair John Fish (Chairman & CEO, Suffolk), above, expressed the industry’s concern about government employees’ reluctant return to their offices in last week’s Wall Street Journal. “Other parts of the country with large federal workforces are also struggling to bring back workers. Whether you’re talking about downtown Boston, or Denver or Northern Virginia, occupancy is down substantially,” said Fish. (WSJ, Nov. 28)

Roundtable President and CEO Jeffrey DeBoer has consistently emphasized that federal policies promoting remote work undermine the health of cities, local tax bases, and small businesses. The Real Estate Roundtable has urged President Biden and national policymakers to end government policies that encourage remote working arrangements for federal employees. (RER letter to President Biden, Dec. 2022; RER letter to Senate, April 2023)

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U.S. Joins Global Push to Slash Building Emissions

Posted on by Trey Jackson

The United States joined China, the UK, and the larger European Union this week in an international initiative to accelerate the buildings sector’s ability to reach “near zero” emissions by 2030. (United Nations press release, Dec. 6)

  • The initiative is a pledge by countries to cut emissions from building operations and construction materials down or close to zero. A Buildings and Climate Global Forum scheduled for March in Paris will flesh-out details.
  • The Biden-Harris administration’s imminent release of a proposed zero emissions building (“ZEB”) definition aligns with this international effort. The ZEB definition will be the first federal government guideline providing voluntary criteria for buildings that aspire to zero emissions status. (Roundtable Weekly, Sept. 29)

SBTi

  • SBTi’s latest guidance includes important revisions urged by The Roundtable and Nareit in joint comments submitted last summer. (Roundtable Weekly, July 14).
  • Notably, SBTi changed course from its original proposal and will allow companies to set science-based emissions targets based on “market-based” solutions such as purchases of renewable energy certificates (RECs).
  • Real estate companies can apply to participate in SBTi’s pilot program through December 10. (SBTi Call for Applicants)

CFTC Guidelines and EPA’s Portfolio Manager

  • The Environmental Protection Agency (EPA) is holding a workshop session for Real Estate Roundtable members on improvements to its ENERGY STAR Portfolio Manager benchmarking tool. The workshop will take place on January 24, 2024 as part of The Roundtable’s State of the Industry meeting in Washington, DC. (Contact RER Meetings about registration)

EPA’s improvements to its free online Portfolio Manager tool, used by nearly 25% of U.S. building space to measure energy use and GHG emissions, is widely supported by the CRE industry. (Coalition letter to EPA, Sept. 14 and Roundtable Weekly, Sept. 15)

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The Roundtable’s Jeffrey DeBoer Recognized as a “Top Lobbyist” for 2023

Posted on by Trey Jackson
Real Estate Roundtable President and CEO Jeffrey DeBoer

Real Estate Roundtable President and CEO Jeffrey DeBoer, above, is one of the “Top Lobbyists” in Washington, DC for 2023, according to the widely-read Capitol Hill publication, The Hill.  This is the sixth consecutive year that DeBoer has earned the recognition. (The Hill, Dec. 6)

  • The Top Lobbyists 2023 list includes “impactful advocates (who) stand out for the results they’ve delivered for their clients, companies, trade associations and advocacy groups in the nation’s capital.”
  • The Hill also noted that after pandemic restrictions were lifted, “these top lobbyists had to navigate a divided Congress—and not just the traditional Republican and Democratic divisions” as a flood of regulatory activity flowed from the Biden administration.

DeBoer commented, “I am honored to lead The Real Estate Roundtable’s policy advocacy efforts and very humbled to be included on The Hill’s top lobbyist list. This personal recognition by The Hill reflects the collective efforts of the Roundtable membership, leadership, and staff. Together we work very hard to deliver non-partisan, data-based policy positions, guided by what is good for communities, job creation, and the economy. This has always been the foundation of our organization’s effectiveness, and it has proven to be even more critical given today’s increasingly challenging policy environment.”

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The Administration and Congress Continue to Urge Federal Agencies to Return to the Office

Posted on by Trey Jackson

Although the Biden administration and Congress continue to urge federal agencies to end pandemic-era telework policies, officials acknowledge they have yet to reach their return-to-office objectives, with only about half of cabinet agencies having achieved the goal of workplace return by January. (Axios, Nov. 30)

Congressional and Administration Efforts

  • On Wednesday, a subcommittee of the House Committee on Oversight and Accountability held a hearing titled, “Oversight of Federal Agencies’ Post-Pandemic Telework Policies,” to discuss the current status of telework policies within various federal agencies.
  • White House Chief of Staff Jeff Zients has been privately urging cabinet secretaries to address the significant number of federal workers who continue to work remotely, encouraging a shift away from persistent work-from-home practices. (Axios, Nov. 30)
  • RER Chair John Fish (SUFFOLK) (above) was quoted in the Wall Street Journal, voicing the industry’s concern for stalled return to the workplace. “Other parts of the country with large federal workforces are also struggling to bring back workers. “Whether you’re talking about downtown Boston, or Denver or Northern Virginia, occupancy is down substantially,” said Fish. (WSJ, Nov. 28)
  • Unions representing federal workers strongly support work from home and have pushed back against the Biden administration’s workplace return goals. (BGov, Sept. 14; Federal Times, Aug. 7)
  • Since the pandemic, Congress has held multiple hearings and introduced legislation in both the House and Senate aimed at solidifying official government definitions of remote work and enhancing the accountability and transparency of federal telework policies. (Roundtable Weekly, Oct. 20)

Roundtable Advocacy

  • The Real Estate Roundtable has urged President Biden and national policymakers for months to end government policies that encourage remote working arrangements for federal employees. (RER letter to President Biden, Dec. 2022; RER letter to Senate, April 2023)
  • In August, the White House ordered cabinet officials to increase the return of federal employees to their offices. (Roundtable Weekly,Aug. 11)

Roundtable President and CEO Jeffrey DeBoer has repeatedly emphasized that remote working by federal employees is undermining the health of cities, local tax bases, and small businesses.

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White House Holds Property Conversions Briefing for Roundtable Members

Posted on by Trey Jackson

Last week, the White House hosted a virtual briefing for Roundtable members to discuss federal loan and guarantee programs at the federal departments of Energy, Housing, Transportation and the General Services Administration that may assist with financing commercial-to-residential conversion projects.

Property Conversions Briefing

  • In October, the administration announced a suite of federal resources—including low-interest loans—across various agencies to assist conversion projects aimed at increasing the housing supply, revitalizing urban downtowns, and cutting climate pollution. (Roundtable Weekly, Oct. 27; White House Commercial to Residential Conversions Guidebook)
  • The briefing last week provided members with a high-level overview of the administration’s conversion work and focused on the Transportation Department’s Transportation Infrastructure Finance and Innovation (TIFIA) and Railroad Rehabilitation and Improvement (RRIF) financing programs. (See FAQs)
  • White House staff also announced upcoming workshops with the Department of Transportation’s Build America Bureau to learn more about how TIFIA and RRIF financing can be used for transit-oriented development (“TOD”) that takes the form of adaptive reuse.

Upcoming Workshops – Federal Resources to Support Commercial-to-Residential Conversions

IRA Tax Incentives – 179D

  • White House staff on the property conversions briefing mentioned that green tax incentives enacted by the Inflation Reduction Act (IRA) may be layered with other federal loan, guarantee, and grant programs to support a project.  (See RER fact sheet, “Clean Energy Tax Incentives Relevant to U.S Real Estate)
  • Roundtable Senior Vice President & Counsel Duane Desiderio was quoted this week in Tax Notes on the deduction in section 179D for energy-efficient commercial buildings.
  • “The IRA’s changes to section 179D are good policy, but more changes need to be made for the deduction to reach its full potential,” said Desiderio.” (Tax Notes, Nov. 28). He explained that Congress should make 179D “transferable” by REITs and other private sector owners.

The Roundtable’s Property Conversions Working Group will continue to serve as a conduit between our members and the administration to help design impactful policies that can assist with office-to-residential conversions. Please contact Roundtable SVPs Duane Desiderio (ddesiderio@rer.org) or Ryan McCormick (rmccormick@rer.org) for more information.

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New Analysis Highlights Importance of Like-Kind Exchanges in Current Market Environment

Posted on by Trey Jackson

A new analysis by Marcus & Millichap demonstrates how like-kind exchanges are fundamental to the health and financing of the commercial real estate industry, particularly during market corrections and liquidity shortages. (Marcus & Millichap – The Importance of Like-Kind Exchanges During Periods of Reduced Commercial Real Estate Market Liquidity, 2023).

Key Findings

  • Commercial real estate transaction volume is down, but like-kind exchanges are up.  Despite a general decline in commercial real estate transactions, the number of 1031 exchanges initiated has increased nearly 15% from 17,467 in the first half of 2019 to 20,070 in the first half of 2023.
  • The analysis attributes the general decline in commercial real estate transactions in the first half of 2023 to the rise in interest rates, stricter lender underwriting, a diminished economic outlook, and a broad spectrum of geopolitical challenges.
  • “The 15% rise in the number of exchanges initiated, when commercial real estate transaction count fell by 22.1%, underscores the importance of like-kind exchanges in periods of reduced commercial real estate market activity.” (Marcus & Millichap)
  • The liquidity generated through LKEs serves as a deterrent against commercial property defaults, consequently reducing risks in the banking and financial systems that could otherwise pose a threat to the broader economy.
  • The Marcus & Millichap analysis draws on data collected by the largest like-kind exchange qualified intermediaries in the country and aggregated by the Federation of Exchange Accommodators, a member of The Real Estate Roundtable’s President’s Council.

The Roundtable’s Tax Policy Advisory Committee (TPAC) will continue working to raise awareness of the role that like-kind exchanges play in supporting the health of the US economy and the stability of real estate markets.

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Lawmakers Extend Government Funding Into Early 2024; Outlook Uncertain for Tax Policy and Other Priorities

Posted on by Trey Jackson
Capitol Hill at dusk

The latest threat of a government shutdown eased this week after President Biden signed two continuing resolutions, funding some agencies until Jan. 19 and others until Feb. 2, giving Congress a chance to pass full-year appropriations bills in early 2024, and leaving the Biden administration’s $106 billion supplemental foreign aid request unresolved. (AP, Nov. 17 |Wall Street Journal | Washington Post | NBC News, Nov. 15)

Window Narrowing for Other Policy Priorities

  • Congress’ focus on the funding measures leave policymakers looking for a potential legislative vehicle that could support a separate, expensive tax package. Conversations among tax policy writers are ongoing, according to Ways and Means Ranking Member Richard Neal (D-MA). (BGov, Nov. 16)
  • Senate Finance Committee Chair Ron Wyden (D-OR) and House Ways and Means Committee Chairman Jason Smith (R-MO) are discussing a package in the $90-100 billion range that would include measures on business interest deductibility and bonus depreciation, as well as an increase in the child tax credit for low-income families. (Roundtable Weekly, June 16)

IRA Tax Incentives

Tax Notes publication
  • On the regulatory front, Roundtable Senior Vice President Ryan McCormick was quoted this week in Tax Notes on the Inflation Reduction Act’s (IRA) rules affecting clean energy credits—and the need to ensure incentives extend equitably to “mixed partnerships” that include both taxable and tax-exempt investors.
  • “Tax-exempt investors in mixed real estate partnerships include pension funds, educational endowments, private foundations, and public charities,” said McCormick, noting that these entities have invested over $900 billion in commercial real estate.
  • The Tax Notes article also addressed problems posed by IRA prevailing wage and apprenticeship rules that were the focus of an Oct. 30 Roundtable comment letter. The letter quantified the large compliance costs and recommended allowing contractors to self-certify their compliance with the wage and apprenticeship requirements. (Roundtable Weekly, Nov. 3)

The Roundtable’s Tax and Sustainability Policy Advisory Committees will remain engaged with policymakers as the IRA rules affecting CRE are finalized and implemented. These issues will be discussed during The Roundtable’s State of the Industry Meeting on January 23-24, 2024 in Washington.

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The Roundtable and Coalition Request Reproposal of Basel III Capital Rulemaking as Banking Regulators Face Bipartisan Congressional Opposition

Posted on by Trey Jackson

The Real Estate Roundtable joined a coalition of 17 national trade associations in a Nov. 14 letter to the Federal Reserve, urging regulators to repropose a sweeping set of proposed rules—known as the “Basel III Endgame”—that would increase capital requirements for the nation’s largest banks. Meanwhile, the nation’s top federal banking regulators testified this week before congressional committees, where they faced stiff bipartisan opposition to the proposal. (U.S. Chamber of Commerce-led coalition letter, Nov. 14 and Axios, Nov. 16)

Bipartisan Opposition

  • In July, the regulators jointly approved the 1,100-page proposed Basel III rulemaking, which aims to guard against potential risk by increasing capital requirements for banks with at least $100 billion in assets. The proposal could have a significant impact on available credit capacity for commercial real estate transactions, as well as undermine liquidity and economic growth. (Roundtable Weekly, Nov. 10 and CQ, Nov. 15)
  • Sen. Chris Van Hollen (D-MD) stated that higher capital standards could impede investment in clean energy while Sen. Bob Menendez (D-NJ) emphasized that higher capital requirements pose a risk for mortgage loans to low-income and minority buyers. (Axios, Nov. 14)
  • Before the hearings, Senate Banking Committee Ranking Member Tim Scott (R-SC) led 38 of his colleagues in a Nov. 13 letter to the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) to withdraw the Basel III Endgame proposal.
  • House Financial Services Committee Chairman Patrick McHenry (R-NC) and Subcommittee on Financial Institutions and Monetary Policy Chairman Andy Barr (R-KY) also sent letters to the regulators on Nov. 14, claiming the Basel III regulations would put the nation’s financial system at a competitive disadvantage.

More Feedback for Basel III

Federal Reserve Vice Chair for Supervision Michael Barr
  • During the hearings, the Fed’s Vice Chair for Supervision Michael Barr defended the proposals, yet responded that regulators are “quite open to comment, and we want to improve the rule before we get to a final rule.”
  • On Oct. 20, the Federal Reserve, FDIC, and OCC announced an extension of the comment period on the Basel capital proposal from Nov. 30, 2023 to Jan. 16, 2024. The agencies also launched a quantitative impact study to clarify the estimated effects of the proposal, with the data collection deadline also due Jan. 16.
  • Since the deadline for stakeholder comments is the same day as the impact study’s final data collection deadline, there is broad concern that the regulators’ failed to provide industry participants with an opportunity to assess and comment on any of the Agencies’ collected data.  (Roundtable Weekly, Oct. 27)

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) discussed the capital requirements proposal during its Nov. 8 meeting in New York. RECPAC welcomes Roundtable membership input as it works on a Basel III comment letter due in January. (Contact Roundtable Senior Vice President Chip Rodgers)

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Business Coalition Urges Congress to Nullify Expansive Joint Employer Rule

Posted on by Trey Jackson
Workers erecting a building framework

The Real Estate Roundtable and a coalition of major business groups sent a letter to all members of Congress last week in support of a joint resolution that would nullify a final rule of the National Labor Relations Board (NLRB). The NLRB “joint employer” rule—scheduled to go into effect on Dec. 26—would render employers vulnerable to claims by “indirect” workers who are not immediate hires. The policy has significant implications that could subject parent-level hotel and restaurant companies, other franchise-model businesses, and companies that hire contractors and subs to expansive joint employer liability. (Coalition letter, Nov. 9 and AP, Nov. 13)

Potential Impact

  • The NLRB rule overturns Trump-era policy and returns to an Obama-era position that makes employers liable to workers they do not directly hire or manage. It also holds joint employers liable for workplace issues they do not control, which range from collective bargaining to workplace safety conditions.
  • The Obama-era version—in place from 2015 to 2017—cost small business franchise operators $33 billion per year, according to the International Franchise Association (IFA). It resulted in 376,000 lost job opportunities and led to 93% more lawsuits against these businesses.
  • The Roundtable joined the coalition letter led by IFA and the U.S. Chamber of Commerce. Other real estate group signatories include the American Hotel and Lodging Association (AH&LA), the National Association of Home Builders, the National Multifamily Housing Council, and national general contracting organizations.  

Party Lines in Congress

U.S. Capitol - viewing upward from left
  • The measure could pass the House but is not expected to advance in the Democratically-controlled Senate.

The U.S. Chamber and other business organizations who are signatories on the coalition letter sent last week also filed a lawsuit challenging the joint employer rule on Nov. 9. Unions groups will likely seek to intervene to defend the NRLB rule. (U.S. Chamber case updates)

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The Roundtable and Broad Business Coalition Urge Congress to Pass One-Year Delay to Beneficial Ownership Rules

Posted on by Trey Jackson
Treasury Department's FinCEN logo

The Roundtable signed onto a letter yesterday with approximately 70 business groups that urges Congress to pass a one-year delay in implementing burdensome “beneficial ownership” reporting requirements. (Coalition letter and PoliticoPro, Nov. 16)

FinCEN Enforcement

  • The new regulations—scheduled to take effect on Jan. 1, 2024 under the Corporate Transparency Act (CTA)—would be implemented by Treasury’s Financial Crimes Enforcement Network (FinCEN).
  • The CTA requires the submission of regular reports to the federal government identifying the beneficial owners of businesses and other legal entities. The new law defines the targeted entities as those having 20 or fewer employees and under $5 million in revenue, which would impact nearly every small business in the nation.
  • The CTA includes civil and criminal penalties of up to $10,000 and two years of jail time for failing to comply.
  • The scope of the data collection is expansive. Covered entities will be required to provide the personal information of owners, board members, senior employees, attorneys, and more, then monitor the information and report all changes. FinCEN expects to receive more than 32 million separate reports in 2024, with an additional five to six million filings each year thereafter.
  • The coalition letter states, “A year’s delay will provide FinCEN and the business community with more time to educate owners of their new obligations. It will also give Congress and FinCEN time to review the new rules to ensure they are successful.”

AICPA & Updated FAQs

the American Institute of Certified Public Accountants (AICPA) logo
  • This week’s letter also notes that the American Institute of Certified Public Accountants (AICPA) recently requested a one-year delay from FinCEN. (AICPA coalition letter, Oct. 30)
  • AICPA noted in its letter that FinCEN significantly underestimated the cost burdens associated with the new reporting regime, relied on vague and arbitrary standards in laying out the criminal and civil penalties under the statute, and implemented filing deadlines for newly-formed entities that in some cases are impossible to meet.
  • On Oct. 13, The Real Estate Roundtable and a coalition of eight other national real estate groups urged Treasury Secretary Janet Yellen to delay implementation of the new beneficial ownership rule. (Roundtable Weekly, Oct. 20 and Industry coalition letter)

Yesterday, FinCEN issued updates to its beneficial ownership “frequently asked questions.” The FAQs include new information about the reporting process, reporting companies, beneficial owners, company applicants, reporting requirements, initial reports, and reporting company exemptions. It also includes new resources related to beneficial owners, initial reports, FinCEN identifiers, and third-party service providers. (.pdf version of the FAQs)

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