On Thursday, House Ways and Means Committee Members Mike Carey (R-OH) and Jimmy Gomez (D-CA) introduced the bipartisan Revitalizing Downtowns and Main Streets Act (H.R.9002), which would create a market-based tax incentive for converting older commercial buildings to residential use.

Revitalizing Downtowns and Main Streets Act

• The bill is a positive step forward in the effort to modernize U.S. real estate, create new and affordable housing, and strengthen cities and neighborhoods that continue to suffer from the aftereffects of the pandemic and changing business needs. 

• “Between high housing costs and the rise of remote work, formerly prosperous neighborhoods across the country are struggling,” said Rep. Carey (R-OH). “The solution is right in front of us. But even though vacant commercial and office space is sitting unused, converting these properties into housing is so expensive it is often uneconomical. This bill will allow communities to meet their residents’ need for affordable, abundant housing and allow American downtowns and main streets to thrive.” (Rep. Carey Press Release)

• The bill would create a new and temporary 20% tax credit for qualified property conversion expenditures, modeled after the historic rehabilitation credit. (RER’S One-Page Summary)

• The total credit authority would be limited to $15 billion, allocated by state housing finance agencies based on feasibility and impact.

• Larger credits would be available for projects in rural areas, low-income census tracts, and economically distressed areas.

• The credit could be stacked with other federal tax benefits, including LIHTC, the rehabilitation credit, and Opportunity Zone benefits. 

Roundtable Advocacy

• The Real Estate Roundtable has supported similar versions of conversion legislation, such as the Revitalizing Downtowns Act (S. 2511, H.R. 4759), introduced by Sen. Debbie Stabenow (D-MI) and Rep. Jimmy Gomez (D-CA). The Roundtable has also worked closely with the White House on administrative actions designed to provide low-cost financing for conversion projects. (Roundtable Weekly, April 19)

• “The Revitalizing Downtowns and Main Streets Act is a proactive, market-based policy measure that aims to breathe new life into underutilized commercial properties, create jobs, generate local property tax revenue, and help reinvigorate our nation’s cities and suburbs,” said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. “We commend the leadership of the bill sponsors for their vision and urge support for this critical bipartisan legislation.”

• The bill addresses and incorporates most of the recommendations a Roundtable-led coalition had collectively made to the Revitalizing Downtowns Act in comment letters submitted in October 2022 and June 2024.  

• Since then, many states and localities have taken bold action to support property conversion efforts.

• Both letters are the product of a property conversions working group created by The Roundtable’s Tax Policy Advisory Committee (TPAC). The working group has reviewed and considered the challenges and impediments confronting potential property conversion activities. (Roundtable Weekly, June 28)

The Roundtable’s Tax Policy Advisory Committee will continue working with policymakers to advance tax policies that encourage and facilitate property conversion efforts.

This week, the U.S. Department of the Treasury, as Chair of the Committee on Foreign Investment in the United States (CFIUS), issued a Notice of Proposed Rulemaking (NPRM) that would expand CFIUS’s jurisdiction over certain transactions by foreign persons involving real estate in the United States. (Treasury Press Release, July 8)

Proposed Rule

• As chair of the Committee on Foreign Investment in the United States (CFIUS), the Treasury has the authority to review certain real estate transactions near specified military installations and to act in appropriate circumstances.

• Under the new proposal, foreign land transactions within a mile of 40 additional military installations and within 100 miles of 19 additional military sites would trigger a CFIUS review.

• The proposed rule would add over 50 military installations across 30 states to the existing list of installations for which CFIUS has jurisdiction.

• The national security review panel has the power to block transactions entirely or impose restrictions on foreign transactions.

• The U.S. Department of Defense (DOD), a member of CFIUS, continuously assesses its military installations and the geographic scope established under the CFIUS regulations to ensure appropriate application in light of national security considerations.

• This proposed rule is the result of a recent comprehensive assessment conducted by the DOD regarding its military installations.

Other Key Changes

• This latest update would vastly expand the reach of CFIUS’s real estate jurisdiction while maintaining its sharp focus on national security.

• The proposed rule would also make other key changes:

• Expand CFIUS’s jurisdiction over real estate transactions between 1 mile and 100 miles around eight military installations already listed in the regulations; and

• Update the names or locations of 21 military installations already listed in the regulations to better assist the public in identifying the relevant sites.

Implications and Next Steps

• The rulemaking comes amid growing bipartisan concern in Congress over the purchase of U.S. agricultural land and other property by China and other foreign adversaries.

• Several GOP-led states have considered or enacted new restrictions on foreign ownership of land, targeting investors with ties to China and other countries. (PoliticoPro, July 8)

• In response to the proposed rule, written comments will be accepted for 30 days following the NPRM’s publication in the Federal Register.

The Real Estate Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to monitor the proposed rulemaking and plans to submit comments.

A coalition of national real estate associations submitted comments to the Cybersecurity and Infrastructure Security Agency (CISA) expressing concerns over a new proposed rule: Cyber Incident Reporting for Critical Infrastructure Act (CIRCIA) Reporting Requirements. As currently drafted, the rule imposes overly burdensome requirements and requires companies to assume unnecessary but significant legal and cybersecurity risks. (Letter)

Cyber Incident Reporting Rule

• Under the current proposal, companies would be required to report significant cyber incidents to the Department of Homeland Security or CISA within 72 hours as well as any ransomware payments within 24 hours.

• Given the ever-expanding cyber-threat landscape, the rental housing and real estate industry has prioritized defense against vulnerabilities.

• The industry has undertaken efforts to mitigate cybersecurity risks, implement policies to prevent and mitigate such risks and encourage investments in bolstering cyber defenses to protect data.
  
  
• The letter noted, “We support a unified but flexible regulatory framework for data security and incident notification, and believe it is important to have a balanced approach to providing consumers with meaningful information about material cybersecurity risks and incidents, while also not imposing overly burdensome regulations on the real estate/rental housing industry or unintentionally exposing our members to substantially greater cybersecurity risks.”

Industry Concerns and Recommendations

• Overly burdensome requirements: CISA should revise the definition of "covered cyber incident" to a higher threshold for reporting to prevent unnecessary administrative load.

• Disproportionate compliance costs: the estimated compliance cost of over $1.4 billion is seen as disproportionate to the benefits. These funds could be better spent on actual cybersecurity measures rather than on reporting.

• Reporting deadlines are unclear and increase the risk of attack: the proposed rule’s 72-hour reporting requirement and 24-hour ransom payment reporting deadline could hinder effective incident response and increase vulnerability to additional attacks.

• The proposed rule adds another reporting requirement to an already cluttered landscape. CISA should harmonize its reporting requirements to reduce compliance burdens.
  

The Real Estate Roundtable’s Homeland Security Task Force and RE-ISAC will continue to be resources and assist CISA in the development of clear, effective, and secure cyber incident reporting rules.