News Type: Roundtable Weekly

Zoom Town Hall: 2024 Election Insights With POLITICO’s Jonathan Martin

Posted on by Abigail Grenadier

With the 2024 elections rapidly approaching, the outcome could significantly shape the future of the economy and the commercial real estate (CRE) industry.

Later this afternoon at 3:00 PM ET, The Roundtable will host an exclusive Zoom Town Hall session featuring Jonathan Martin, Politics Bureau Chief and Senior Political Columnist for POLITICO. He will share his expert insights on the political landscape, highlighting the most significant races and trends leading up to the election.

In addition to Martin’s analysis, The Roundtable will give a brief update on its policy priorities on tax policy, capital and credit issues, energy and sustainability initiatives, housing affordability, and more.

This Zoom session, provided to RER members only, will provide a unique opportunity to gain political insight from one of the country’s top analysts, alongside critical updates on the Roundtable advocacy efforts.

RER members will receive a link to register for the event.

If you are unable to join the session, a recording will be available next week.

Hurricanes Helene and Milton: The Case for NFIP Reform

Posted on by Abigail Grenadier

Commercial real estate owners face soaring insurance costs as back-to-back hurricanes place financial strain on insurers and the National Flood Insurance Program (NFIP). The implications for property owners, especially in coastal areas, are severe, with insurance premiums skyrocketing and coverage harder to secure.

Storm Impact and Market Challenges

  • Milton is the second major storm to strike Florida in less than two weeks. The hurricane could cause over $50 billion in damages, with worst-case losses approaching $175 billion, according to Wall Street analysts. (CNBC, Oct. 8)
  • Potential insured losses from Milton are expected to be substantial and could amount to $60 billion, according to an S&P Global Inc. report. (Bloomberg, Oct. 9)
  • Without a robust, long-term NFIP, property owners face escalating risks from future storms, leaving both homeowners and commercial real estate properties vulnerable. (Roundtable Weekly, Oct. 4)
  • With more severe storms expected, CRE property owners are struggling to cover rising costs—sometimes opting to forego upgrades or sell assets to manage financial pressures. (NYT, Oct. 8)
  • According to Marsh McLennan, premiums on commercial properties have increased by an average of 11% nationwide, and even more in storm-prone areas. The report also states that owners with “significant exposures and sustained losses” can expect rates to climb by 50% to 100%.
  • “High-magnitude catastrophe losses, the enduring challenges of the pandemic on the supply chain, fluctuations in the employment market, and rising inflation have banded together to create a perfect storm that threatens the sustainability of every property portfolio.” (Marsh McLennan report)

Federal Challenges and Response

  • Lawmakers remain divided on addressing FEMA’s potential disaster fund shortfall, which could jeopardize rebuilding infrastructure like roads and water facilities. Speaker Mike Johnson has indicated no plans for Congress to reconvene and approve more disaster funding. (PoliticoPro, Oct. 9)
  • The Biden administration is confident that FEMA’s disaster relief fund has sufficient resources to support recovery efforts for both Helene and Milton. However, they have raised concerns about the fund’s solvency through the remainder of the hurricane season ending in November. (PoliticoPro, Oct. 10)
  • Milton could also spark debate again in Washington, D.C., about the need for a national catastrophe insurance program. (PoliticoPro, Oct. 9)

NFIP Under Pressure

  • With nearly two million NFIP policies in areas hit by Helene and Milton, the program’s $15 billion in coverage may fall short, prompting debates over whether to raise the NFIP’s borrowing authority, forgive debt, or appropriate funds to cover policyholders’ claims. (Politico, Oct. 9)
  • House Financial Services Chair Patrick McHenry (R-NC) and the committee’s lead Democrat, Rep. Maxine Waters (D-CA), have previously collaborated on long-term NFIP reform. However, they now hold differing opinions on how to free up funds for claims if needed.
  • Rep. McHenry leans toward raising the NFIP’s borrowing cap or appropriating additional funds, while Rep. Waters has consistently supported debt forgiveness. Currently, Congress has set a $30.4 billion limit on the NFIP’s borrowing capacity from the Treasury.
  • The Roundtable has been a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms. These measures are essential for residential markets, overall natural catastrophe insurance market capacity, and the broader economy.

The Roundtable, along with its industry partners, continues to work constructively with policymakers and stakeholders to address commercial insurance gaps and rising costs. RER will continue advocating for targeted policy solutions that can help alleviate increased insurance costs for housing providers nationwide.

Roundtable Offers Policy Guide to US-DOE to Shape Effective Building Performance Standards

Posted on by Abigail Grenadier

The Real Estate Roundtable urged the U.S. Department of Energy (DOE) on Wednesday to follow a newly released policy guide as the agency awards grants for states and localities to develop Building Performance Standards (BPS). The guidebook developed by the Roundtable’s Sustainability Policy Advisory Committee (SPAC) reflects RER’s ongoing commitment to addressing climate change while ensuring the economic sustainability of real estate investments and the communities they support. (Letter, Oct. 8)

Building Performance Standards (BPS)

  • State and local governments are increasingly adopting BPS laws that impose energy and climate performance mandates on real estate.
  • These laws typically set annual limits on how much energy buildings can use and how much greenhouse gases (GHGs) they can emit, with an ultimate goal of reaching net zero emissions around 2050.
  • International groups also apply pressure for energy and emissions performance limits on buildings to drive global investments in real estate. (Roundtable Weekly, July 19)

  • The Department of Energy (DOE) in August announced $240 million in federal grants to help states and localities implement BPS laws. (Roundtable Weekly, Sept 6).

  • The inconsistent nationwide BPS “patchwork” poses significant challenges for property owners and policymakers alike. These laws must be backed by studies and adequate resources to ensure they achieve significant emission reductions—while continuing to further parallel efforts to support the recovery of business districts and increase the supply of affordable housing.
  • “Our members face a variety of local and state legislative initiatives around building performance standards which lack consistent, implementable, fact-based frameworks. The federal government has the research and analysis heft to create and maintain a voluntary system of fair, reasonable, and effective BPS guidelines to help inform these efforts ” said Anthony E. Malkin, Chair of the Roundtable’s SPAC (Chairman and CEO, Empire State Realty Trust).
  • “Our peer-reviewed, 20-point policy guide intends to help start and guide a discussion of the subject,” he continued. 
Source: US-DOE, IMT (map as of August 2024)

BPS Policy Guide: 20 Key Points

  • RER’s policy guide should shape how DOE disburses tens of millions of taxpayer-funded federal grants to states and cities across the country. It outlines 20 key points that should be prioritized when developing and implementing BPS laws. These include:
  • Develop science-based and data-driven standards. Policymakers should base building performance targets on robust cost-benefit analyses, housing affordability studies, grid resilience assessments, and actual data on energy usage.

  • Align standards across jurisdictions. Property owners face confusing and inconsistent mandates. Policymakers should harmonize rules to ease multi-jurisdictional compliance and use landmark federal programs as a uniform means for compliance.

  • Provide clear compliance resources and fair remedies. Policymakers should ensure that BPS laws come with transparent, accessible compliance pathways that building owners can follow. This includes offering practical resources, technical assistance, and incentive programs to help owners plan for “life-cycle” capital investments and retrofits. Enforcement mechanisms should offer building owners reasonable opportunities to correct non-compliance before imposing fines.

RER welcomes engagement on the 20-point policy guide to help craft BPS laws that are fair and effective.

The Roundtable Shares 2025 Tax Legislative Agenda with Lawmakers

Posted on by Abigail Grenadier

Responding to a request for input from the chairs of the House Ways and Means Committee and Ways and Means Tax Policy Subcommittee, The Real Estate Roundtable submitted comments on the pending expiration of the Tax Cuts and Jobs Act of 2017 and ways in which tax policy can support long-term investment, economic stability, and the creation of affordable housing. (Letter, Oct. 2)

Roundtable Recommendations

The letter from Roundtable President and CEO Jeffrey DeBoer urges lawmakers to ensure that any major tax legislation in 2025 retain or include:

  • The reduced tax rate on long-term capital gains. The capital gains rate is critical for driving long-term real estate investment and fostering job creation. Raising capital gains rates, taxing unrealized gains, or double-taxing gains at death would deter entrepreneurship, increase costs, and reduce economic mobility.
  • Tax fairness for partnerships and pass-through entities. Half of the nation’s tax partnerships are real estate-related, making these provisions vital to the industry’s success.  Section 199A, which provides a 20% deduction on pass-through business income (including REIT dividend income), allows privately held businesses to compete on a level playing field with large corporations.
  • Like-kind exchanges. Section 1031 allows for the deferral of capital gains through real estate exchanges and helps gets languishing properties into the hands of new owners who will invest in, and improve, them.  Retaining section 1031 is vital to promoting reinvestment in communities, creating opportunities for minority and small business owners, and improving struggling properties.
  • Tax rules that encourage, rather than deter, foreign investment in U.S. real estate. Targeted changes to the outdated and discriminatory Foreign Investment in Real Property Tax Act (FIRPTA) could unlock capital for large-scale real estate and infrastructure projects that create jobs and spur economic development.
  • Incentives for affordable housing, energy efficiency, and community revitalization. The Roundtable supports expanding the low-income housing tax credit (LIHTC), improving the real estate-related clean energy tax provisions in the Inflation Reduction Act, and introducing new incentives for the conversion of obsolete commercial buildings into affordable housing. The letter also calls for a long-term extension of Opportunity Zone (OZ) tax incentives and preserving carried interest tax rules that recognize and reward sweat equity with capital gains treatment.

The Roundtable is committed to working with lawmakers to ensure the U.S. maintains a competitive tax code that encourages capital formation, rewards entrepreneurial risk-taking, and supports critical policy objectives, including accessible and affordable housing and safe and healthy communities.

The Push for Office-to-Residential Conversions

Posted on by Abigail Grenadier

Cities across the U.S. are increasingly embracing office-to-residential conversions as part of the solution to address persistent housing shortages and high office vacancy rates driven by remote work policies. Many local governments in key metro areas have accelerated incentive programs and made major progress, bringing thousands of new homes into the development pipeline with more to come.

Challenges and Incentives

  • Property conversions can be a cost-effective means to re-purpose certain CRE assets to provide new, affordable housing supply, revive struggling city centers and small businesses, restore local revenue sources, and reduce energy consumption. While costs can vary depending on the building and other project factors, at least one recent property conversion is estimated to cost 40% less than a wholly new apartment building. (Morning Brew, Sept. 24)
  • Office-to-residential conversions present a path to revitalizing downtown areas, but regulatory and financial hurdles must be addressed to unlock their full potential. (ULI, Sept. 27)
  • Various cities are actively pursuing policies to incentivize these conversions through zoning changes and tax incentives:
  • New York City proposed a $400 million initiative to support the conversion of older office buildings into residential units. The “City of Yes for Housing Opportunity” plan aims to create 500,000 new homes over the next decade by legalizing zoning conversions for buildings constructed before 1990 in areas where residential use is allowed, and expands the types of housing commercial buildings can be converted into.
  • Washington, D.C. has implemented the Housing in Downtown program, designed to catalyze new residential development through a 20-year tax abatement for commercial-to-residential conversions, with expectations to deliver 6.7 million square feet of residential use. (BisNow, Sept. 19)
  • Minneapolis took steps last week to simplify its office-to-residential conversion process by passing an ordinance that streamlines the review process, reduces project timelines, and pauses certain affordability requirements for five years. (CBS, Sept. 24)
  • San Francisco has seen limited success despite efforts to incentivize conversions. Only two projects totaling 165 units are underway, prompting Mayor London Breed and Supervisor Matt Dorsey to propose eliminating impact fees and affordable housing requirements for downtown conversions in key areas. (GlobeSt., Oct. 1)
  • California faced a setback this week when Governor Gavin Newsom vetoed a bill aimed at expediting the conversion of vacant office buildings into residential or mixed-use spaces. The legislation would have mandated by-right approval for adaptive reuse projects, streamlining the review process by bypassing environmental reviews and local zoning approvals. (GlobeSt., Oct. 1)
  • This week on the Walker Webcast, Dr. Peter Linneman (Leading Economist, Professor Emeritus, The Wharton School of Business) predicted there will be a push for back-to-office policies after the November elections, regardless who gains control of the White House. (Walker Webcast, Oct. 2)

Climate Risks and Opportunities

Workers on sustainable energy project on rooftop of building
  • Office-to-residential conversions are recognized universally as having positive climate impacts because they reduce “embodied” emissions in concrete, glass, and other construction materials relative to new projects built from the ground up. (Arup, Dec. 2023; Urban Green, Dec. 2023; NAIOP (April 2023)).
  • Expanding the use of clean energy tax credits, as proposed in the IRA, could further incentivize conversion projects, helping to reduce long-term operating costs and improve building resilience.
  • With tax policy debates at the forefront in Washington, The Roundtable submitted recommendations to Congressional tax leaders this week (see Tax story above), urging enhancements to the Inflation Reduction Act’s clean energy tax provisions in any future legislation. (Letter, Oct. 2)
  • The recommendations included expanding energy-efficient tax credits to cover low-emissions building equipment and allowing developers to transfer the 45L and 179D credits, which would help reduce housing costs and boost energy efficiency.
  • The Roundtable has also encouraged federal agencies to make key improvements to their existing low-interest loan programs to better support property conversions that support high-density, transit-oriented housing. (Roundtable Weekly, April 19)
  • A recent Morningstar report highlighted the growing importance of ESG considerations in real estate investment, with 67% of global asset owners acknowledging that ESG factors have become more material over the past five years. (CREFC, Oct. 1)

The Roundtable will continue to advocate for support at the federal level, such as the bipartisan Revitalizing Downtowns and Main Streets Act (H.R.9002) introduced in July, to create market-based tax incentives for office-to-residential conversions. These projects offer a promising but complex solution to both the commercial real estate market’s transformation and the housing shortage. With proper support, they could reshape and rebuild cities across the country.

Hurricane Helene Highlights Need for National Flood Insurance Program Reform

Posted on by Abigail Grenadier

Hurricane Helene wreaked havoc along the east coast, causing widespread flooding and over $20 billion in damages to homes, businesses, and infrastructure. The storm underscored the critical need to reform the National Flood Insurance Program (NFIP), which is set to expire in December.

Hurricane Helene Damages

  • The frequency of severe weather events continues to rise, yet many communities are underinsured or entirely without flood coverage.
  • Without a robust, long-term NFIP, property owners face escalating risks from future storms, leaving both homeowners and commercial real estate properties vulnerable.
  • The NFIP is the primary source of flood coverage in the U.S., relied upon by 4.7 million properties in high-risk areas. (Reuters, Oct.3)
  • Moody’s Analytics estimates the storm caused $15 billion to $26 billion in property damage, as well as an additional $5 billion to $8 billion in lost economic output. (Washington Post, Sept. 29)
  • Moody’s RMS Event Response is preparing a more precise estimate of the insured losses caused by Hurricane Helene that will be released in the coming weeks. (Fox Business, Sept. 30)

Roundtable Advocacy

  • The Roundtable, along with nine industry organizations, wrote to Congress last week urging them to extend the National Flood Insurance Program (NFIP) before its Sept. 30 expiration. (Letter)
  • As part of the CR package passed last week, the NFIP was extended until Dec. 20.
  • Congress has enacted over 31 short-term extensions of the NFIP. The Roundtable has been a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms.
  • A long-term reform and reauthorization of the NFIP is essential for residential markets, overall natural catastrophe insurance market capacity, and the broader economy.

The Roundtable, along with its industry partners, continues to work constructively with policymakers and stakeholders to address commercial insurance gaps and rising costs. The Roundtable will continue advocating for targeted policy solutions that can help alleviate increased insurance costs for housing providers nationwide.

Impact of Rate Cuts on CRE and Housing Markets

Posted on by Abigail Grenadier

The Federal Reserve’s recent decision to cut rates renewed optimism in the commercial real estate market, following a prolonged period of high interest rates and economic headwinds. This monetary easing is seen as critical to the CRE sector’s path to recovery—reducing financing costs and helping stabilize property valuations.

Industry Insights

  • These predicted rate cuts, alongside lower bond yields, are expected to boost commercial real estate investment activity and asset values. (CBRE, Sept. 18)
  • Roundtable member Willy Walker (CEO, Walker & Dunlop) appeared on CNBC’s Squawk Box, to discuss the importance of removing barriers such as zoning restrictions to increase housing supply. “It’s going to be a very healthy market for commercial real estate as rates start to come down.” (Watch)
  • Roundtable member David O’Reilly (CEO, Howard Hughes Holdings) discussed the resurgence of new construction in the housing market on Fox Business, anticipating that home prices will stabilize in response to interest rates cuts, influencing both demand and affordability. He also highlighted the effects of prolonged high rates on pricing and market trends. “As long as those rates continue to trend lower… demand picks up, more sales occur, prices will remain steady as home builders continue to deliver more supply to meet that demand.” (Watch)

Housing Affordability at the Forefront

  • The Senate Budget Committee, chaired by Sen. Sheldon Whitehouse (D-RI), held a hearing this Wednesday, Sept. 25, on housing unaffordability. The hearing focused on the need for significant policy reform to boost housing supply, remove regulatory barriers to new construction, and deregulate land use and zoning. (Watch Hearing)
  • Chair Whitehouse introduced the Affordable Housing Construction Act, which aims to tackle the housing crisis by expanding the Low-Income Housing Tax Credit (LIHTC) program, loosening financing requirements, and ensuring affordability for 50 years— an increase from the previous 30-year mark. (Sen. Whitehouse News Release)
  • The bill also pushes for more sustainable, energy-efficient, and accessible housing.

Rate cuts from the Fed are providing relief for both CRE and housing markets, but sustained recovery and resolution of the affordability crisis will require continued policy reform, increased housing supply, and greater collaboration between public and private sectors.

EPA Issues New Rules Impacting Building Air Conditioning Systems

Posted on by Abigail Grenadier

The U.S. Environmental Protection Agency (EPA) is accelerating regulatory actions that will affect how real estate owners and developers design, install, and manage air conditioning systems that use refrigerants to cool buildings.

Hydrofluorocarbons (HFCs) Impact Climate Change

  • Air conditioning and refrigeration systems in buildings depend on HFCs. An estimated 20% of the total electricity used in buildings’ worldwide electricity consumption comes from space cooling that uses high-emissions refrigerants. (International Energy Agency)  

EPA Rule on HFC Leak Detection and Repair

  • EPA issued an AIM Act implementation rule on Monday focused on leak detection and repair of equipment that uses HFCs. Starting in 2026, building owners and other operators of heat pumps, chillers, and other air conditioning systems that contain at least 15 pounds of HFC-containing refrigerants are subject to these new requirements. (POLITICO, Sept.. 23)
  • Large appliances that use at least 15,000 pounds of refrigerants must install automatic leak detection for new systems starting in 2026, and existing systems starting in 2027. (EPA fact sheet)
  • The new rule also sets requirements for HFC disposal, and HFC recycling that must be used during installation and repair of new fire suppression systems. (EPA fact sheet)

Proposed Rule on HFC Transition

  • Separately, EPA has proposed rules that would phasedown the manufacturing of HFCs controlled by the AIM Act altogether, and set “technology transition” deadlines for when buildings must install new AC systems using refrigerants that are less harmful to the environment.
  • The Roundtable submitted comments yesterday on the proposed “technology transition” rules. The comments expressed concern that EPA’s deadlines do not account for permitting and construction processes in complex buildings designed to accommodate AC and refrigeration systems years before equipment is actually installed.
  • As RER’s letter explains, strict, immutable deadlines that ‘strand’ buildings from HFC regulatory compliance are not what Congress intended and may not be the best interpretation of the statute.
  • RER also stated it seeks a partnership with EPA “to educate our industry leaders on the AIM Act’s requirements” and help regulators better understand how the HFC phasedown may impact new construction, existing building retrofits, and real estate ownership, operations, and financing.

Yesterday, RER’s Sustainability Policy Advisory Committee (SPAC) held an educational session with members to start raising awareness about the new regulations (Slide deck). RER will continue to coordinate with the EPA as implementation of the HFC phase-down and transition unfolds.

Congress Averts Shutdown – New Deadline Set for Dec. 20

Posted on by Abigail Grenadier

Congress passed a three-month continuing resolution on Wednesday, funding the government through Dec. 20 and avoiding a shutdown ahead of the Sept. 30 deadline. While this provides some temporary stability, lawmakers face additional fiscal challenges on the horizon—including the need for a long-term reauthorization of the National Flood Insurance Program (NFIP). (The Hill, Sept. 26)

What’s Next

  • The House passed the CR package 341-82, followed by the Senate approving it 78-18.
  • The bill now heads to President Biden for his signature, ensuring government operations continue through late December.
  • After passing the bill, Speaker Mike Johnson reiterated he won’t allow an omnibus spending bill during the lame-duck session. (The Hill, Sept. 24)
  • If Congress fails to pass final spending bills in December, funding negotiations will overlap with efforts to address two other looming fiscal deadlines: the debt limit, which is waived until early January, and the expiration of many 2017 tax cuts at the end of next year. (Politico, Sept. 25)

National Flood Insurance Program (NFIP) Extended

  • The Roundtable, along with nine industry organizations wrote to Congress this week urging them to act quickly to extend the National Flood Insurance Program (NFIP) before its Sept. 30 expiration. (Letter)
  • As part of the CR package, the NFIP was extended until Dec. 20.
  • Congress has enacted over 31 short-term extensions of the NFIP. The Roundtable has been a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms.
  • A long-term reform and reauthorization of the NFIP is essential for residential markets, overall natural catastrophe insurance market capacity, and the broader economy.
  • The Roundtable, along with its industry partners, continues to work constructively with policymakers and stakeholders to address commercial insurance gaps and rising costs. The Roundtable will continue advocating for targeted policy solutions that can help alleviate increased insurance costs for housing providers nationwide.

Both the House and Senate are in recess and won’t return to Washington until Nov. 12, after the election.

Treasury and IRS Propose Detailed Rules for Expanded EV Charger Tax Credit

Posted on by Abigail Grenadier

This week, the Treasury Department and IRS released proposed rules for the expanded investment tax credit (Section 30C) for electric vehicle (EV) chargers installed in low-income and rural areas. The credit, enhanced by the Inflation Reduction Act (IRA), is poised to encourage private-sector investment in EV charging infrastructure. (PolitcoPro, Sept. 18)

Proposal Details

  • The proposed rules should help accelerate the buildout of a reliable and convenient charging network.  In 2021, President Biden set forth an ambitious plan for a nationwide network of public and private EV charging stations. 
  • The 30C credit covers as much as 30% of qualifying costs, up to $100,000 per charger for businesses and $1,000 for individuals. (Bloomberg, Sept. 19)
  • In particular, the rules related to qualifying census tracts should encourage the construction of charging stations at industrial properties, commercial parks, warehouses and logistics facilities, and port-adjacent properties that are unpopulated themselves but in the vicinity of denser, population centers.
  • Treasury’s proposed rule broadly defines “low-income” and “rural” areas, making nearly two-thirds of the U.S. population eligible for the credit. (AP, Sept. 18)
  • In addition, one significant change that the IRA made to section 30C, is that the credit applies per charging port, not per location, boosting savings for developers by reducing the cost of building multiple ports at one station.
  • The Roundtable submitted comments in Dec. 2022 to Treasury and IRS on the Section 30C tax credit, urging the IRS to issue guidance to clarify the components of EV charging property that qualify for the credit, the geographic areas that are 30C-eligible, and depreciation matters. (Roundtable Weekly, Dec. 2022)
  • The new proposed rules reflect feedback from The Roundtable on many of the key issues raised, including important clarifications on component eligibility.
  • While White House advisor John Podesta emphasized that the rule will help expand EV access across all communities, Sen. Joe Manchin (I-W.Va.) criticized the broad definition of “non-urban,” claiming it overlooks rural areas. (The Hill, Sept. 18)

What’s Next

  • With the tax policy debate at the forefront in Washington, House Speaker Mike Johnson made remarks this week regarding the future of the IRA. He pledged to cut “wasteful” spending while preserving some clean energy tax incentives. He emphasized using a “scalpel” rather than eliminating all provisions, acknowledging that certain credits benefit economic growth.
  • In August, 18 Republicans wrote to Speaker Johnson expressing concern that “[p]rematurely repealing energy tax credits, particularly those which were used to justify investments that already broke ground, would undermine private investments and stop development that is already ongoing.”  (The Hill, Sept. 18)
  • Treasury will accept public comments on the proposed regulations through Nov. 18.

The Roundtable’s Tax Policy Advisory Committee (TPAC) and Sustainability Policy Advisory Committee (SPAC) are reviewing the proposed rulemaking in its entirety and may provide additional written comments to the regulators.