Lawmakers pushed a sprawling $1.2 trillion legislative package through Congress today that would avoid a government shutdown at midnight by funding more than half the government through Sept. 30. After the House passed the funding measure today, the Senate will likely approve the package and send it to President Biden for his signature. (Bloomberg and Forbes, March 22)

Minibus Faces Fiscal Cliff

• If the Senate debate goes past the midnight “fiscal cliff,” the White House budget office can delay a shutdown order before Monday. Congress is aiming to pass the budget before departing Washington for their two-week Easter break. (Washington Post, March 20 and AP, March 22)

• The 1,012-page, six-bill “minibus” (H.R. 2882) includes funding for the IRS, Pentagon, Department of Homeland Security, and foreign aid. Five and a half months after FY2024 began on Oct. 1, 2023, the government has operated on temporary funding extensions. (PBS, March 22)

• The Congressional Budget Office listed a detailed breakdown of this week’s funding bundle on March 21. The other half of the government’s budget was enacted earlier this month under a two-tiered congressional agreement. (NBC News, March 9 and Roundtable Weekly, March 1)

House Republicans

• Rep. Marjorie Taylor Greene (R-GA) filed a motion (H. Res. 2203) to remove House Speaker Mike Johnson (R-LA), above, from his leadership post in protest over the legislation. Since the motion was filed but not brought up for a vote, no immediate action will be taken. “This is more of a warning than a pink slip,” she said. (Wall Street Journal, March 22)

Speaker Johnson’s House Republican caucus is about to drop to a one-vote majority, as retiring Rep. Mike Gallagher (R-WI) will exit the House as soon as next month. (Politico, March 22)

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The White House Council of Economic Advisers released a report yesterday on policies to boost the supply of affordable rental and ownership units—proposals that could form the foundation of a housing push during a second Biden term. (2024 Economic Report of the President and New York Times, March 21)

Zoning Reform, LIHTC

• The Annual Report of the Council of Economic Advisers provides that public funds could be used to encourage zoning reforms at the local level, reduce financing constraints, and support workforce training to support housing construction. (See Chapter 4, “Increasing the Supply of Affordable Housing: Economic Insights and Federal Policy Solutions”)

• The report explains that the federal government could reduce exclusionary zoning via grants and other spending, and directly subsidize affordable unit construction through programs like the low-income housing tax credit (LIHTC). The report adds, “Ultimately, meaningful change will require State and local governments to reevaluate the land-use regulations that reduce the housing supply.”

Addressing Equity

• The Council’s report addresses how increasing the housing supply could increase access and equity for groups with few financial resources, increase overall wealth, and reduce disparities across groups. (Page 163 of the Annual Report of the Council of Economic Advisers)

• The report notes that exclusionary zoning policies, such as prohibitions on multifamily homes, are a “subset of local land-use regulations that can constrain the housing supply and thus decrease affordability.”

This week, President Biden also spoke in Las Vegas about his plans to “establish an innovative program to help communities build and renovate housing or convert housing from empty office spaces into housing, empty hotels into housing.” (White House remarks, March 19 and Roundtable Weekly, March 15)

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The Environmental Protection Agency (EPA) released long-awaited final criteria on Tuesday for ENERGY STAR’s voluntary “NextGen” certification to recognize buildings with reduced carbon footprints.

Three Criteria

• NextGen builds upon ENERGY STAR’s popular “label” for highly efficient buildings. The new label has three criteria that must be independently verified to:
  
  
  • Demonstrate Superior Energy Performance
    The building must achieve an ENERGY STAR score of 75 or higher and meet all criteria associated with ENERGY STAR certification.
    
    
  • Use Renewable Energy
    At least 30 percent of a building’s total energy used onsite must derive from renewable sources. Market-based measures like power purchase agreements (PPAs) and renewable energy certificates (RECs) can qualify as long as they meet certain quality control criteria (e.g., Green-e certified).
    
    
  • Meet a Direct Emissions Target
    The building must meet a GHG intensity target for its property type, which adjusts to account for days of extra heating required in colder climates.

CRE Recognition

• “NextGen highlights RER’s constructive engagement with decision makers who translate policy to action,” said Tony Malkin, above, (Chairman, President and Chief Executive Officer, Empire State Realty Trust, Inc.), chair of The Roundtable’s Sustainability Policy Advisory (SPAC) Committee.

• He added, “The NextGen voluntary standard provides specific metrics-based criteria to recognize the very best performers who increase efficiency, reduce emissions, and help expand the nation’s supply of renewable energy. This new framework allows our members to urge cities and states to look to these researched and logical federal standards rather than create their own unduly complicated and punitive mandates.”

• “Our work with EPA is not done,” Malkin continued. “Our next project with our EPA partners is to recognize inefficient buildings which will never reach ENERGY STAR levels and still take steps to reduce materially energy use in common areas and tenant spaces.”      

Planning Considerations

• Companies can apply online to EPA for the NextGen label starting in Sept. 2024.

• EPA’s response to public comments noted the agency will explore “separate recognition” for inefficient buildings that significantly improve energy performance.

• In February, RER and Nareit urged that EPA’s NextGen label should be considered a critical intermediate step for an asset to show it is “on a path” to meet the Energy Department’s yet-to-be-released, voluntary Zero Emissions Building (ZEB) definition.

• Building owners may report to investors about assets certified with the NextGen label. Information on green-labeled buildings could be within the scope of disclosure requirements released earlier this month by the U.S. Securities and Exchange Commission (SEC) and passed last year in California. (See RER’s facts sheets on the SEC and California requirements).

• Court challenges are currently underway against both the SEC and California corporate climate reporting rules. The SEC’s rule has been stayed at least temporarily by a federal appeals court. (POLITICOPro, March 20 and Roundtable Weekly, March 15).

EPA staff overseeing the NextGen program will participate on SPAC’s next Zoom meeting on April 11 to field questions on the new building label.

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The Real Estate Roundtable joined more than 120 other national business organizations in a letter this week that urged Senate Banking Committee leaders to support a one-year filing delay for new beneficial ownership regulation requirements, which took effect Jan. 1 under the Corporate Transparency Act (CTA). (Coalition letter, March 19)

CTA Delay Bills

• The CTA impacts more than 32 million existing entities and an additional 5 million newly created entities every year. These companies and other legal entities face increased paperwork, privacy risks, and potentially devastating fines and prison terms. (New York Times, March 4)

• The coalition’s March 19 letter expressed strong support for passage of the Protect Small Business and Prevent Illicit Financial Activity Act (S. 3625), introduced by Banking Committee Ranking Member Tim Scott (R-SC), which would extend the deadline for companies to report beneficial ownership information to the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). [FinCEN’s current requirements]

• Companion legislation in the House (H.R. 5119), introduced by Reps. Zach Nunn (R-IA) and Joyce Beatty (D-OH), passed by a vote of 420-1 on December 12, 2023.

• Initial filings under the CTA began more than two months ago in accordance with the new law, yet fewer than 2 percent of covered entities have submitted their required information to FinCEN. One reason for this low compliance rate is that most business owners are ignorant of the new law. A one-year delay would provide the business community and FinCEN additional time to educate millions of small business owners about the new reporting requirements and its onerous penalties.

Legal Challenge

• This week’s coalition letter also explains that a one-year delay would accommodate the time it will take for a March 1 District court decision, which ruled the CTA regulations as unconstitutional, to work its way through Appellate and Supreme Courts. (Roundtable Weekly, March 8)

• The ruling earlier this month from the District Court for the Northern District of Alabama was narrow, applying only to National Small Business Association (NSBA) member plaintiffs named in the case. As a result, non-NSBA firms should continue to comply with the CTA pending further developments. (FinCEN’s current requirements) 

• The March 19 letter to the Senate Banking Committee states, “It is obvious more time is needed. Congress did not enact the CTA in order to turn millions of law-abiding small business owners into felons.”

• The Roundtable has consistently opposed the beneficial ownership rules. We continue to work with policymakers to identify a balanced position that would inhibit illicit money laundering activity but does not place unnecessary costs and legal burdens on the real estate industry. (Coalition letter, Nov. 2023)

The Roundtable’s Real Estate Capital Advisory Committee (RECPAC) will continue to monitor legislative and legal developments as they impact beneficial ownership requirements.

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