News Type: Roundtable Weekly

Federal Officials, Roundtable Focus on Potential Election-Related Threats

Posted on by Trey Jackson

CISA Presentation to HSTF Oct 2022 start

This week, U.S. security officials released information on their efforts to secure the nation’s election infrastructure and protect American voters from intimidation, discrimination or threats of violence related to the Nov. 8 midterm elections. The potential for political violence, cyberattacks and mitigation strategies were also among the topics of discussion during yesterday’s Real Estate Roundtable Homeland Security Task Force (HSTF) virtual meeting. (Presentation to HSTF | Justice Department bulletin and Politico, Oct. 24)

Election Security

CISA Presentation Slide to HSTF Oct 2022

  • As election sites and offices are hardening formerly soft targets, hiring security guards, and installing bulletproof and bomb-resistant glass, the HSTF meeting featured a discussion with Mohamed Telab—Deputy Regional Director (DRD) for the Cybersecurity and Infrastructure Security Agency’s (CISA) Region II—on federal resources available for securing elections. (Axios, Oct. 9 and CISA website)
  • Earlier this month, CISA Director Jen Easterly said, “At this time, we are not aware of any specific or credible threats to compromise or disrupt election infrastructure” although the current threat environment is “more complex than it has ever been.” (Politico, Oct. 24 and Reuters, Oct. 17)
  • The FBI previously issued a public service announcement on Oct. 12 warning about election crimes and the Department of Homeland Security announced in June that “calls for violence by domestic violent extremists” against election workers, candidates and democratic institutions will likely rise closer to the midterms. (CNBC, Oct. 27)

Local Tactics

Mail Ballot Drop Box

  • Domestic disinformation campaigns and homegrown threats to poll workers are emerging as the more significant concerns ahead of midterm elections than foreign interference. Extremists are reportedly focusing their efforts locally, monitoring neighborhood ballot boxes and signing up as poll workers. (Axios, Oct. 26)

The Roundtable’s HSTF and the Real Estate Information Sharing and Analysis Center (RE-ISAC) work closely with federal officials on potential cyber and physical threats to CRE. Roundtable members interested in participating in the HSTF or RE-ISAC can contact Roundtable Senior Vice President Chip Rodgers or call 202-639-8400.

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White House Seeks to Speed Up Infrastructure Implementation

Posted on by Trey Jackson

Mitch Landrieu -- White House Infrastructure Coordinator

A White House “Accelerating Infrastructure Summit” on Oct. 13 showcased actions by the administration to hasten infrastructure project construction by improving coordination with mayors and governors. (Summit video and White House Action Plan)

Accelerating IIJA Investment

  • Mitch Landrieu, the White House’s infrastructure coordinator (photo above) stated, “With over 90% of Bipartisan Infrastructure Law funding being delivered by non-federal agencies, our state, tribal, regional, territorial, local and industry partners must also find ways to accelerate the delivery of infrastructure.” (ABC News, Oct. 13)
  • The plan—funded under the $1.2 trillion bipartisan Infrastructure Investment and Jobs Act (IIJA) enacted last November and supplemented by the Inflation Reduction Act in August—is the most significant investment in infrastructure since the interstate highway initiative during the Eisenhower administration. The Roundtable strongly backed the IIJA as it moved through the legislative process. (Roundtable Weekly, Nov. 12, 2021)
  • The IIJA broadens access to federal funding programs by targeting resources toward communities. The administration launched a webpage on Grants.gov and a Technical Assistance Guide to help communities with infrastructure project resources, from grant writing to funding eligibility requirements. A web-based interactive map also shows where IIJA funds have been disbursed in communities across the nation.

On Time, On Task, and On Budget

Cover -- Infrastructure Acceleration Report

The Roundtable continues to support federal transportation infrastructure investments to spur economic growth, support local communities, and enhance America’s competitiveness. (Roundtable Weekly, May 20 and Roundtable’s 2022 Policy Agenda)

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White House “Clean Air in Building Challenge” Invites Owner Participation; SEC Delays Climate Rule

Posted on by Trey Jackson

White House Indoor Air Quality Summit

Real estate and other industry leaders recently participated in the first White House Summit on Indoor Air Quality (IAQ) as part of the Biden administration’s continued focus on the benefits of healthy buildings in the pandemic era. (Summit video, Oct. 12 and International WELL Building Institute, Oct. 13) 

Building Owner “Pledge” 

    • Create a clean indoor air “action plan” (e.g., regular HVAC inspections and maintenance)
    • Optimize fresh air ventilation (e.g., use economizers, open operable windows)
    • Enhance air filtration (e.g., install MERV-13 filters)
    • Communicate IAQ practices with building occupants  
  • Speakers at the summit included Silverstein Properties’ Chief Innovation Officer Guy Vardi and Dr. Joseph Allen, Healthy Buildings Program Director at Harvard University. Roundtable President Jeffrey DeBoer interviewed Dr. Allen at the height of the COVID-19 lockdown. (Roundtable Weekly, May 8, 2020 | Watch the video interview) 

Agency Developments 

EPA logo

  • The Environmental Protection Agency (EPA) recently released a Request for Information to solicit feedback from industry, researchers, and the public on key characteristics and measures of improved ventilation, filtration, and air cleaning in buildings. Comments are due by Dec. 5, 2022. 

In other news, the Securities and Exchange Commission will reportedly delay by “months” its release of a long-anticipated final rule on corporate climate disclosures. (Bloomberg Law, Oct. 19) The agency continues to assess the legality of its proposal under recent U.S. Supreme Court case law and sift through more than 14,000 comments received from the public—including input provided by The Roundtable and other CRE groups in June. (Roundtable Weekly, Sept. 16 and June 10) 

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Congressional Lame Duck Session May Include Tax Policies Impacting Real Estate

Posted on by Trey Jackson

Capitol Dome Stormy weather

Lawmakers returning after the midterm elections for a lame duck session will work on a possible FY2023 “omnibus” budget package that may include tax policies of importance to commercial real estate. 

Omni First 

  • The first congressional priority will be a massive “omnibus” budget package that needs to pass by December 16—the deadline set by a Continuing Budget Resolution passed in September—to avoid a partial government shutdown. (Roundtable Weekly, Sept. 30)
  • Whether business tax relief—e.g. a delay in the pending phase-out of 100 percent bonus depreciation, tax extenders, or a fix to the business interest deductibility rules—will be attached to an omni package may depend on whether a bipartisan deal can be struck on child tax credit relief. (Politico, Oct. 6 and Tax Policy Center, Oct. 6)

Tax Extenders

Tax issues grid choice image

  • Certain provisions from the Tax Cuts and Jobs Act of 2017 (TCJA) recently expired, including rules related to business interest deductibility. TCJA’s 100% bonus depreciation benefit starts phasing down at the end of this year. Other expired tax provisions include a temporary increase in allocations of low-income housing tax credits (LIHTCs) to states.   

  • The Real Estate Roundtable has long supported well-designed, targeted tax incentives like the LIHTC that are aimed at boosting the construction and rehabilitation of badly needed affordable and workforce housing. (Roundtable 2022 Policy Agenda Tax Section)
     
  • House Republicans have made the permanent extension of the TCJA tax cuts a key element of their Commitment to America policy agenda. (Bloomberg, Sept. 23 and ABC News, Sept. 22) 

Packed Lame Duck 

Congress in session

  • A cascade of other national policy issues will vie for attention in the tightly packed lame duck agenda, including reauthorization of defense programs, hurricane relief, immigration, election reform, marriage equality and more. (Axios, Sept. 29)
  • House Republican Minority Leader Kevin McCarthy (R-CA) said that if the GOP controls the House in 2023, they will use raising the debt limit as leverage to force spending cuts—which could include cuts to Medicare and Social Security—and possibly limit funding to Ukraine. (PunchBowl, Oct. 18 and Bloomberg Law, Oct. 11) 

The House returns Nov. 9 and the Senate on Nov. 14.

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Biden Administration Expands Low-Income Housing Financing and Provides More Flexibility to Affordable Housing Developers

Posted on by Trey Jackson

Housing construction

The Biden administration on Oct. 7 announced several new federal agency actions aimed at closing the housing supply shortfall as part of its Housing Supply Action Plan, launched in May. (White House statement, Oct. 7 | Multi-Housing News, Oct. 10 | Roundtable Weekly, May 20)

LIHTC Reform

The White House’s announcement focused on efforts to reduce barriers to affordable housing construction and preservation by:

  • Finalizing Treasury rules that reform the Low-Income Housing Tax Credit (LIHTC) income guidelines. The new rules provide greater flexibility to develop mixed-income housing, housing for very low-income tenants, and housing in sparsely populated rural areas. Specifically, the final regulations create an alternative means of complying with the rent restriction requirements of the LIHTC. The new rules allow owners to measure and average their tenants’ income based on a broader range of qualifying incomes (20 to 80 percent of the area median). 
  • Extending LIHTC deadlines to ensure that affordable housing projects delayed by public health, economic, and supply-chain issues can be built as expeditiously as possible and still qualify for the credit. (IRS Notice 2022-52)
  • The Real Estate Roundtable has long supported well-designed, targeted tax incentives like the LIHTC that are aimed at boosting the construction and rehabilitation of badly needed affordable and workforce housing. (Roundtable 2022 Policy Agenda Tax Section)

Other Federal Actions Announced by the White House

Construction of affordable housing

  • Reforming and streamlining Fannie Mae’s and Freddie Mac’s Forward Commitment programs, which allow developers to secure financing to pay off a construction loan when construction has been completed and the housing project has been approved for occupancy. Each GSE will be able to provide $3 billion in Forward Commitments per year—above and beyond the multifamily purchase cap.
  • Enabling more affordable housing development and preservation with State and Local Fiscal Recovery Funds (SLFRF) under the American Rescue Plan. Treasury and the Department of Housing and Urban Development jointly published a “How-To” Guide to further encourage state and local governments to make use of these funds with other sources of federal funding.
  • Promoting more housing options near transit and other modes of transportation, coordination of transportation and housing planning, and rewarding jurisdictions that have removed barriers to housing development.
  • Increasing transportation investments that can connect and expand affordable housing supply. The Department of Transportation (DOT) has begun awarding grants for recipients where local governments are improving their transportation infrastructure and promoting a range of transportation, environmental, urban planning, and housing policy goals.
  • DOT also announced “TIFIA 49,” which authorizes borrowing from the Transportation Infrastructure Finance and Innovation Act (TIFIA) program up to 49 percent of eligible costs for projects that meet eligibility requirements, an increase from 33 percent of eligible project costs.

Real Estate Views

Willy Walker on SquawkBox

  • The National Multifamily Housing Council and National Apartment Association applauded the Biden administration’s plan. Their joint statement noted the U.S. needs to produce 4.3 million more apartments by 2035 to keep up with demand.
  • Roundtable Member Willy Walker, above left, chairman and CEO of Walker and Dunlop, joined CNBC’s Squawk on the Street on Oct. 12 to discuss supply and demand challenges in the housing market, rent increases associated with inflation, and the consequence of banks pulling back loans from commercial real estate. (Watch video) 

The Real Estate Roundtable’s Research Committee and Real Estate Capital Policy Advisory Committee (RECPAC) has formed an Affordable Housing Working Group, which is working on a report to address expansion of the nation’s housing infrastructure.  

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Real Estate Industry Urges Lawmakers to Consider Tax Incentive for Property Conversions

Posted on by Trey Jackson
CRE with green trees

A Roundtable-led coalition of 16 national real estate organizations on Oct. 12 recommended certain enhancements and expansions to the Revitalizing Downtowns Act (S. 2511, H.R. 4759). The bill was introduced by Sen. Debbie Stabenow (D-MI) and Rep. Jimmy Gomez (D-CA) to encourage the conversion of older buildings into new uses. (Coalition letter) 

Qualified Property Conversions Credit 

  • The coalition noted that many buildings are being reimagined and repurposed to address a severe shortage of housing and meet other post-pandemic business needs. Where appropriate, property conversions can be a cost-effective means to develop new housing supply, create jobs, and generate critical sources of local property tax revenue while saving energy and reinvigorating communities.

  • The Revitalizing Downtowns Act would provide a 20 percent tax credit for qualified property conversion expenditures. The credit is modeled on the historic rehabilitation tax credit and could be used for office buildings that are at least 25 years old at the time of the conversion.

  • An office-to-residential conversion project may qualify for the credit if the project provides at least 20 percent affordable housing—or is subject to an alternative affordable housing arrangement under state or local policy, ordinance, or agreement. 

Real Estate Industry Recommendations 

Denver

  • The recommendations include:
    • (a) expanding the category of properties eligible for the credit to include other types of commercial buildings, such as shopping centers and hotels;
    • (b) extending the incentive to real estate investment trusts (REITs); and
    • (c) reducing the conversion expenditure requirement from 100 percent of the building’s basis to 50 percent—along with half-a-dozen other suggestions.

  • The coalition letter is the work product of a property conversions working group created by The Real Estate Roundtable’s Tax Policy Advisory Committee. The working group has reviewed and considered the challenges and impediments confronting potential property conversion activities.  

Recent media articles on property conversions include “Cities push to convert deserted office buildings into housing” (Axios, Sept.  28) and “Multifamily Developers Turn Some Dead Office Space into Apartments” (WealthManagement.com, Oct. 4). 

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FASB Approves Two-Year Extension for Transitioning LIBOR Contracts to Alternative Benchmark

Posted on by Trey Jackson

FASB-log-horizontall-450w

The Financial Accounting Standards Board (FASB) recently voted to extend accounting relief to companies working to transition financial contracts from the London Interbank Offered Rate (LIBOR) benchmark to an alternative benchmark such as the Secured Overnight Financing Rate (SOFR). (Wall Street Journal, Oct. 5) 

Transition Timing 

  • LIBOR was the dominant reference rate used in recent decades for financial contracts—including commercial real estate debt, mortgages, student loans and derivatives—worth an estimated $223 trillion. (Roundtable Weekly, Dec. 10, 2021.
  • The FASB relief allows companies until the end of 2024 to update or renegotiate Libor-backed loans. Companies that change the reference rate—as opposed to a more substantive alteration such as extending the loan’s maturity—will not be required to record a new loan. (UHY, Oct. 6)
  • The two-year, optional extension from Dec. 31, 2022 to Dec. 31, 2024 aims to help banks and borrowers transition LIBOR-based loans—including legacy “tough legacy” contracts.
  • Banks can continue using LIBOR in U.S. dollars and other currencies on existing loan contracts through June 2023. U.S. banks stopped issuing new financial contracts using LIBOR at the end of last year. (Wall Street Journal, June 7)

LIBOR to SOFR

Libor transition to SOFR image

  • The Federal Reserve and other regulators prefer banks and borrowers use the alternative benchmark SOFR. Companies are considering using two versions: overnight SOFR, administered by the Federal Reserve Bank of New York—and term SOFR, which benefits companies that borrow or lend in one-, three- or six-month periods. (NYS Society of CPAs, Oct. 6)
  • The Wall Street Journal reported that federal regulators prefer a version of SOFR because of its stability, as opposed to credit-sensitive alternatives such as the Bloomberg Short Term Bank Yield Index.

Legislative Support

  • Separately, Congress passed the Adjustable Interest Rate (LIBOR) Act (H.R. 4616) in March to provide for an orderly transition of debt contracts away from LIBOR, as part of an “omnibus” bill to fund the government. (Roundtable Weekly, March 11)
  • The Real Estate Roundtable and 17 national trade groups submitted letters in 2021 on April 14 and July 27 to policymakers in support of measures to address “tough legacy” LIBOR-based contract issues. (Roundtable Weekly, Dec. 10, 2021) 

The LIBOR transition will be among the issues for discussion during The Roundtable’s Real Estate Capital Policy Advisory Committee’s (RECPAC) next meeting on Nov. 2 in New York City. 

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Hurricane Ian Raises Issues on Natural Catastrophe Risk and Reform of National Flood Insurance Program

Posted on by Trey Jackson

Hurricane Ian aftermath

The catastrophic damage revealed this week in the wake of Hurricane Ian shows the need for Congress to address natural catastrophe risk and pass a long-term reauthorization of the National Flood Insurance Program (NFIP). The Real Estate Roundtable has long advocated for a long-term program extension to avoid lapses that create uncertainty in both the insurance and housing markets.

NFIP & CRE

  • Originally enacted in 1968, the NFIP has been extended under 22 short-term congressional reauthorizations, including last week’s stopgap funding bill that extended government operations until Dec. 16. (Congressional Research Service report, Oct. 3 and Roundtable Weekly, Sept. 30)
  • The total potential debt exposure to properties in the path of Ian could be as high as $52 billion. (Trepp, Sept. 29 “Hurricane Ian Makes Landfall: Mapping the Commercial Real Estate Exposure”)
  • Recovery from storms could take longer and cost more to rebuild amid continued supply chain constraints and inflationary pressures. Media coverage included:
    • “Property Damage from Hurricane Ian Now Estimated Between $41 Billion to $70 Billion” (WorldPropertyJournal, Oct. 7)
    • “The Impact Hurricane Ian Could Have on CRE” (GlobeSt, Oct. 3)
    • “’Never Seen Anything Like This’: CRE Assesses Impact Of Hurricane Ian” (BisNow, Oct. 2)
    • “Ian will ‘financially ruin’ homeowners and insurers” (PolitcoPro, Oct. 1)

The Roundtable continues to work with lawmakers and coalition partners to address catastrophic risk issues and enact a long-term extension to the NFIP that includes effective reforms.

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Treasury and CISA Seek Comments on Potential National Cyber Insurance Program

Posted on by Trey Jackson

CISA LogoAs cyberattacks pose an increasing threat to the real estate industry and the U.S. economy, the government is seeking input from policyholders, critical infrastructure owners, and operators on a potential federal response for catastrophic cyber incidents, including whether a national cyber reinsurance program is warranted. (Treasury Department Notice, Sept. 29 and NextGov, Sept. 28)

Response to Catastrophic Cyber Attacks

Terrorism & Cybersecurity

CIAT logo

  • The Roundtable and its partners in the Coalition to Insure Against Terrorism (CIAT) have raised concerns about the need for effective insurance products to help manage the risks of catastrophic cyberattacks. (CIAT comment letter on the 2022 Report on the Effectiveness of the Terrorism Risk Insurance, May 16)
  • Insurers and the federal government’s Terrorism Risk Insurance Program (TRIP) may not cover the expanding range of such losses. For example, TRIP may only cover cyberattacks if they can be considered “terrorism” under its defined program criteria. (Roundtable Weekly, June 24)
  • Separately, CISA is requesting input on the implementation of cyber incident reporting requirements (due Nov. 14). CISA is also hosting a series of public listening sessions in cities throughout the nation as an additional means of gathering stakeholder responses on definitions for the proposed rules, the form and content of reports, enforcement procedures, and information protection policies. (Federal Register and Notice of Public Listening Sessions, Sept. 12)

Cybersecurity has long been a focus of The Roundtable’s Homeland Security Task Force (HSTF) and the Real Estate Information Sharing and Analysis Center. Cybersecurity issues and CRE will be discussed during the next HSTF meeting on Jan. 25, 2023—held in conjunction with The Roundtable’s State of the Industry meeting. (Roundtable Meeting Calendar)

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Treasury Requests Public Input on Inflation Reduction Act Energy Tax Incentives

Posted on by Trey Jackson

U.S. Treasury DepartmentThe Treasury Department and Internal Revenue Service (IRS) issued six separate notices this week to gather public input regarding the clean energy tax credits and deductions in the Inflation Reduction Act (IRA). (Treasury Fact Sheet, Oct. 4 and Roundtable Weekly, Sept. 30)

CRE Impact

  • The Treasury and IRS notices most relevant to the real estate industry concern the new law’s provisions regarding:
    • Incentives to improve energy efficiency such as the tax deduction for commercial buildings (Section 179D) and the credit for single- and multi-family residential construction (Section 45L);
    • Credits for specific clean energy technologies like solar panels, energy storage, combined heat and power systems, dynamic glass, and grid interconnection property (Section 48);
    • Credit monetization which can allow businesses to transfer the amount of certain credits to third parties; and
    • Enhancements to boost the value of certain credits where projects are located in economically distressed areas, or that meet labor requirements for prevailing wages and apprenticeship hiring.
  • Comments are due to the Treasury and IRS by November 4.

  • Roundtable fact sheets detail the IRA’s Clean Energy Tax Incentives (Sept. 20) and Revenue Provisions (Aug. 17).

Rapid Implementation

Bloomberg Center energy efficiency canopy

  • Congress authorized $270 billion to the IRA’s clean energy tax incentives – putting Treasury and the IRS, in coordination with the Energy Department and the Environmental Protection Agency, at the forefront of implementation. (E&E Greenwire, Oct. 5 and Roundtable Weekly, Aug. 12)
  • One of Treasury’s guiding principles for the public comment process is to “provide clarity and certainty” for businesses and other taxpayers to access the incentives, “so the climate and economic benefits can take effect as quickly as possible.” (Treasury Fact Sheet)

  • White House Senior Adviser John Podesta said, “We have to get implementation right. That means we have to listen, engage, and move quickly to translate policy into action.” (Reuters and Bloomberg Law, Oct. 5)

The Roundtable, working through its Sustainability and Tax Policy Advisory Committees (SPAC and TPAC), will coordinate with industry partners to develop comments to the Treasury and IRS notices that highlight CRE clean energy priorities.

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