Tax incentives that assist clean energy projects deployed by the real estate sector are crucial to reducing the built environment’s carbon footprint and achieving national climate goals.

The Inflation Reduction Act of 2022 (IRA) was signed into law by President Biden on August 16, 2022. The $790 billion legislation — the largest federal clean energy investment in U.S. history — includes nearly $370 billion in climate spending that affects “clean energy” incentives important to commercial real estate.

Rules proposed by the Securities and Exchange Commission (SEC) in March 2022 would require excessive reporting by registered companies to exactly quantify emissions and financial risks from climate change — through metrics that are unknown, unknowable, and premised on speculations and hypotheticals.

The SEC’s proposal would impose “one size fits all” requirements on companies to disclose in their 10-Ks climate-related risks and emissions, including Scope 3.

The U.S. Environmental Protection Agency’s ENERGY STAR for Certification for Buildings program is a proven platform for building owners and managers to “label” their assets as top energy efficiency performers in the marketplace.

Investors, tenants, and employees seek buildings and workplaces with ENERGY STAR ratings because they signal well-managed, profitable assets with reduced carbon footprints. 

To complement its “whole building” rating program, in 2018, the EPA issued its first labels to recognize commercial tenants for high-performance design and construction of leased spaces.

The behavior, space design, and equipment choices of tenants can account for more than 50% of energy consumed in commercial buildings—beyond the owner’s ability to control. Expanding EPA’s ENERGY STAR program to add tenant-based recognition is thus a key objective to achieve better efficiency, lower energy use, and a reduced carbon footprint attributable to U.S. real estate.

States, cities, and other localities are increasingly passing laws and ordinances that impose regulatory mandates on buildings to reduce greenhouse gas (GHG) emissions, energy consumption, or both. These local laws are known as Building Performance Standards (BPS).

The effect of BPS laws, and the energy consumption and emissions “targets” they would impose on buildings, can require asset owners to pay for energy efficiency “retrofits,” electrification projects, and install solar panels or other clean energy technologies. If an owner does not take such steps to reduce emissions or energy use, they could pay fines or penalties.

Lessons Learned to Shape Fair and Reasonable Building Performance Standards (BPS) 20-Point Policy Guide Oct. 2024

A number of real estate companies use science-based protocols to establish portfolio-wide emissions reductions targets. As the buildings sector makes progress on reducing greenhouse gas emissions to meet global climate goals, The Roundtable and Nareit have submitted joint comments about specific, proposed guidance that would create “unworkable and unattainable” GHG standards.

There is no mandate in the U.S. at the federal level for real estate companies to set science-based emissions targets. However, anticipated rules from the U.S. Securities and Exchange Commission are expected to require registered companies to report to investors on material climate-related financial risks. Those disclosures could include corporate efforts to reduce emissions.

In 2022, an estimated 72% of office workers worldwide worried about air quality in their workplaces’ buildings—emphasizing the importance of improved ventilation, filtration, and air cleaning in buildings. 

The federal government has a role to play in ensuring that the needs of tenants can be met by building owners and managers.

Over $1.5 trillion of commercial real estate loans are maturing in 2023, 2024, and 2025, the bulk of which were financed when base rates were near zero. They now require refinancing in an environment where rates are much higher and commercial real estate markets face economic pressures from employees’ lingering reluctance to return to the office and new needs for space in the post-pandemic landscape. To address this wave of maturing commercial real estate debt, market liquidity must be restored and borrowers’ ability to raise capital in this challenging economic environment must be preserved.

In the wake of the U.S. banking turmoil of March 2023, federal bank regulators are considering an increase to capital requirements for the nation's largest banks —those with $100 billion or more in assets—by as much as 20%. This could significantly affect liquidity for commercial real estate transactions, impact asset values, and influence economic growth. The proposed changes to large bank capital requirements would implement the final components of international banking regulations known as the “Basel III endgame.”

Foreign investment is a major source of capital for U.S. commercial real estate, leading to job creation and economic growth for communities throughout our nation. Some policy measures at the national and state level have sought to restrict, sometimes successfully, foreign investment in U.S. real estate to protect the nation’s economic, military, and civil interests.    

A beneficial owner refers to an individual who owns at least 25% of a company or enough to exert significant control over it. Beginning in January 2024, the Corporate Transparency Act (CTA) will require businesses to disclose information on their beneficial owners under regulations issued by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The CTA aims to prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity.

The evolving threats and crises of today's world, primarily COVID-19 and the increasing occurrences of natural disasters, has highlighted the lack of and need for commercial real estate insurance coverage. Inadequate coverage will lead to economic uncertainty, harm stakeholders, and undermine the growth of communities.

In many lines of commercial insurance, pandemic-related coverage has been withdrawn or restricted going forward. Additionally, risks from natural disasters like floods, hurricanes, wildfires, hail, tornadoes, and drought cost the U.S. billions of dollars each year.

Legal cannabis-related businesses (CRBs) face challenges obtaining bank accounts, and commercial property owners face legal challenges of taking on CRB tenants without safe harbor protections.

Federal and state law differences on cannabis policy leave banks and real estate providers trapped between their mission to serve lawful businesses in local communities—and the threat of federal enforcement action.

The Real Estate Roundtable's Homeland Security Task Force (HSTF) is focused on enhancing the commercial facilities sector's ability to meet its current and future security-related challenges by analyzing threats, sharing information, and fostering resilience through a broad threat matrix of physical and cyber risks.

The Real Estate Information Sharing and Analysis Center (RE-ISAC) is a public-private partnership between the U.S. commercial facilities sector and federal homeland security officials. It is the primary conduit of terrorism, cyber, and natural hazard warning and response information between the government and the commercial facilities sector. 

Through this network, the RE-ISAC engages in operational efforts to coordinate activities supporting the detection, prevention, and mitigation of a full range of physical, data, and cyber threats to the nation’s critical infrastructure.

Growing geopolitical conflicts have raised security concerns around cyberattacks and exposed existing vulnerabilities in the nation’s cybersecurity regime, heightening the necessity to build robust domestic cyber defense systems for commercial facilities.

Congress and federal agencies have also mandated or proposed new cyber incident reporting requirements for critical infrastructure and public corporations.

Commercial real estate faces numerous threats from natural catastrophes, international and domestic terrorism, and organized retail crime. These threats cost businesses, cities, and the economy billions in losses. The Roundtable continues to build a more secure and resilient industry through our Homeland Security Task Force (HSTF) and active role in the Real Estate Information Sharing and Analysis Center (RE-ISAC). 

Our work remains focused on tangible measures—developed through increased cross-agency information sharing and cooperation with law enforcement and intelligence agencies—that the commercial real estate industry can take to guard against these threats. As the nature of threats evolves, The Roundtable will remain a central advocate and conduit of information to ensure the places where our friends, family, and neighbors live, work, shop, and play are safe and secure.

The work-from-home trend continues to exert negative pressure on commercial real estate property values, reducing municipal tax revenues, harming local businesses, and threatening the viability of public transit systems. On the federal government level, agencies’ actions to promote permanent remote working are out of step with the direction of private sector employers, who are increasingly recognizing the importance of bringing employees back to the workplace.

Certain commercial real estate assets like office buildings are under significant stress due to pandemic-related issues, including employers’ greater reliance on remote work arrangements. These economic pressures have led asset owners to explore the conversion of offices to other uses, including affordable housing. The Roundtable is encouraging lawmakers to help revitalize cities, boost local tax bases, and address market challenges by enacting incentives that encourage adaptive uses of older, under-utilized buildings.

Investments in infrastructure and the strength of real estate markets share a synergistic, mutually beneficial relationship. Infrastructure investment throughout the country was sparked when The Infrastructure Investment and Jobs Act (IIJA) was signed into law in Nov. 2021 by President Biden – after the House and Senate cleared the measure with bipartisan support in a rare show of congressional consensus.

The IIJA is a historic, $1.2 trillion bill that allocates $550 billion in new spending to improve the nation’s “physical” infrastructure (transportation, water, sewer, electric grid, and broadband systems). Ninety percent of funding authorized by the IIJA will be implemented by governors and mayors. The investments in local infrastructure made by possible by the law will help make our communities safe, productive, and supportive of healthy real estate markets.

Effective Public-Private Partnerships (P3s) can unlock private investment capital and finance major infrastructure projects across the country. Examples of P3s that should be encouraged and improved are low-interest-rate loan programs created by the Transportation Infrastructure Finance Innovation Act (TIFIA).

Policies that encourage appropriate Public-Private Partnerships (P3s) can unleash private equity investments, improve budget certainty, accelerate project delivery, and achieve greater efficiencies and innovations in project design and construction. 

Permit delays dampen private sector investment in infrastructure projects and add to overall costs. A report by the nonprofit organization Common Good estimates that a six-year delay in starting construction on public projects costs the nation more than $3.7 trillion.

The need to enact permitting reform policies is an area of general agreement among Washington policymakers, but legislative proposals under consideration in the House and Senate are far apart and have become part of intense discussions over federal budget priorities.

In many parts of the country, there is a severe shortage of affordable and workforce housing. Supply constraints, often related to restrictive state and local policies, exacerbate the problem. 

The impact of this growing undersupply of affordable housing is far-reaching and undermines economic growth, particularly in urban areas.

The Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, play a crucial role in addressing the affordable housing crisis by backing multifamily property loans, which increase the housing supply and create successful apartment communities. Yet, over a decade after the GSEs were put into conservatorship, the U.S. housing finance system still needs to be reformed.

The federal regulator and conservator of Fannie and Freddie—the Federal Housing Finance Agency (FHFA)—should remain focused on leveraging federal incentives to bolster new affordable housing supply instead of considering the imposition of new or expanded federal obligations on private rental housing providers such as rent control.

The low-income housing tax credit (LIHTC) is a public-private partnership that serves as a federal incentive for new construction and redevelopment. It is an efficient, market-based housing solution that relies on the private sector to finance, build, and operate affordable housing. 

Under the successful LIHTC program, states can award housing credits based on their affordable housing priorities. They can target credits to certain populations, such as seniors or veterans, or to specific regions most in need of affordable housing.

Tax-exempt private-activity bonds (PABs) are proven tools to mobilize public and private co-investment in affordable housing. States and cities use PABs to borrow on behalf of private companies and nonprofits, lowering borrowing costs for entities that might otherwise turn to corporate bonds or bank loans. Interest on PABs is not excluded from gross income unless it is a qualified bond, which must meet strict requirements and serve a public benefit—such as affordable rental housing or mortgage provisions for first-time lower-income borrowers.

A federal "YES In My Backyard" (YIMBY) approach when awarding grants to states and municipalities is needed to counter local “Not In My Backyard” (NIMBY) policies that drive up costs and create barriers to the development of affordable housing. A YIMBY approach is also needed to counter burdensome and duplicative federal government reviews that are necessary to obtain real estate development and transportation permits.

The Biden administration recently announced federal actions to lower housing costs and boost the supply of affordable housing. As part of this government-wide effort, the General Services Administration (GSA) will identify and market surplus federal properties that represent the best opportunities for commercial-to-residential conversions. The GSA initiative will continue to convene developers, municipalities, and other stakeholders to learn about opportunities and challenges.

Tax incentives that assist clean energy projects deployed by the real estate sector are crucial to reducing the built environment’s carbon footprint and achieving national climate goals.