Senate Passes Historic Bipartisan Infrastructure Legislation
The Senate on Aug. 10 passed a historic, bipartisan $1 trillion+ infrastructure bill that would allocate $550 billion in new spending to improve the nation’s transit, utilities and broadband. The Infrastructure Investment and Jobs Act (H.R. 3684) was approved 69-30, with support from all Democrats and 19 Republican Senators, including Minority Leader Mitch McConnell (R-KY). (Wall Street Journal and New York Times, Aug. 10)
Why it Matters
- Real Estate Roundtable Chair John Fish (Chairman and CEO, Suffolk) on Aug. 11 commented, “With the Senate’s passage of this bill, we are one step closer to realizing a once-in-a-generation opportunity to rebuild and reimagine the buildings of tomorrow. We applaud both this historic investment in our nation's infrastructure, and the members of Congress who have reached across the aisle to find common ground.”
- Real Estate Roundtable President Jeff DeBoer added, “By devoting more than a trillion dollars toward American infrastructure projects, this long-term investment in the nation’s roads, bridges, mass transit, high-speed rail, broadband, power grid, water pipes, and electric vehicle charging will prompt positive, transformational change for our communities and citizens.” (Roundtable statement, Aug 11)
- The Roundtable held an all-member Infrastructure Town Hall on Aug. 12 to discuss the Senate bill, its prospects in the House and what it means for commercial real estate. Rep. Tom Suozzi (D-NY), a member of the tax-writing House Ways and Means Committee, joined Roundtable Chair John Fish, Jeffrey DeBoer and other Roundtable staff for the Town Hall discussion. (See Tax Policy story below and The Roundtable’s Bipartisan Infrastructure Deal Fact Sheet)
- Roundtable policy specialists also briefed members of the CREW (Commercial Real Estate Women) Network on Aug. 11 about how the infrastructure legislation could potentially impact CRE.
- The 2,700-page Senate bill evolved from bullet points to legislation after a painstaking journey of more than a month by a group of bipartisan senators who negotiated with the Biden Administration. (Politico and Senate Group Joint Statement, Aug. 10)
- President Biden remarked about the Senate bill, “Forecasters on Wall Street project that over the next 10 years our economy will expand by trillions of dollars, and [the legislation] will create an additional 2 million jobs.” (White House Remarks, Aug. 10)
- The amounts that would be invested by the “Bipartisan Infrastructure Deal” (BID) to various infrastructure categories are listed in White House summaries and The Roundtable’s BID Fact Sheet.
- The BID seeks no tax increases on families or businesses as “pay-fors.”
- The Senate bill includes Roundtable-supported measures that will utilize public-private partnerships to reach ‘physical’ infrastructure goals, streamline the federal permitting process, and improve key federal energy data used in EPA building labels.
- The Senate’s “physical” infrastructure package now goes to the House.
- House Speaker Nancy Pelosi (D-CA) has insisted that she will not bring up the Senate’s “physical” infrastructure bill until the Senate also passes a sprawling $3.5 trillion “human” infrastructure bill with funding for climate programs, health care, education and child care. (New York Times, Aug. 10).
Majority Leader Steny Hoyer (D-MD) announced the House will interrupt its summer recess and return to session on Aug. 23 to consider the Senate-passed budget resolution that Democrats have insisted is a precursor to votes on the bipartisan infrastructure deal. (NBC News, Aug. 10) (See “reconciliation” story below)# # #
Senate Democrats Pass Budget Resolution that Would Authorize $3.5 trillion “Human Infrastructure” Bill with Large Tax Increases
Senate Democrats voted August 11 to advance a $3.5 trillion “human infrastructure” budget resolution, which allows development of legislation that could pass later this year without any Republican support. The budget blueprint passed on a party-line vote of 50-49 the day after the Senate passed a $1.2 trillion “physical infrastructure” bill on a bipartisan basis. (BGov, Aug 11 and Roundtable Weekly, story above)
Why It Matters
- The Senate budget resolution supports President Biden’s wide-ranging domestic priorities that aim to expand the federal social safety net and combat climate change. (New York Times and The Hill, Aug. 11)
- The sprawling human infrastructure proposal would be partially financed by raising taxes on corporations and wealthy individuals – and potentially include a variety of tax increases affecting commercial real estate.
- The Senate measure also provided instructions for various committees to craft bills under “reconciliation” budget rules. If approved by the Senate Parliamentarian, the committees’ work would be combined into final legislation that could pass on a majority vote, thereby bypassing a Republican filibuster. (Senate Democratic Memorandum, Aug. 9)
- The House announced this week that it will return early from summer recess on Aug. 23 to consider the budget resolution. (Associated Press and CQ, Aug. 11)
- House Speaker Nancy Pelosi (D-CA) reiterated on Aug. 11 that until the Senate finishes and passes the massive reconciliation bill, the House will not vote on the physical infrastructure legislation. Other Members of the Democratic Caucus, including Rep. Josh Gottheimer (D-NJ), co-chair of the bipartisan Problem Solvers Caucus, have called on Congressional Leaders to decouple the measures and send the bipartisan infrastructure bill to the President without delay. (Politico, Aug. 11 and The Hill, Aug. 11)
Taxes & CRE
Roundtable President and CEO Jeffrey DeBoer commented on the Senate’s $3.5 trillion reconciliation bill and the tax proposals under consideration.
- DeBoer on Aug 11 stated, “This [reconciliation] package may be financed with a variety of tax increases affecting step-up in basis, like-kind exchanges, carried interest and capital gains that would act as a cumulative drag on investment at the exact time when sectors of the economy need incentives to recover from the pandemic. The Roundtable urges Senate and House policymakers to be very cautious as they proceed on the reconciliation bill – so that one-step forward with the physical infrastructure bill is not met with two-steps backward from tax increases.” (Roundtable statement, Aug. 11)
- The Roundtable this week produced a summary of budget reconciliation tax issues that could directly impact commercial real estate, including:
- Like-Kind Exchanges
- Capital Gains
- Pass-through Business Income
- Step-up in Basis and Taxation of Gains at Death
- Carried Interest
- Energy Efficiency Incentives
- Affordable Housing Incentives
- During the Senate’s extensive Aug. 11 debate on the budget resolution, a nonbinding amendment to preserve the current law tax treatment of like-kind exchanges passed on a unanimous, voice vote. Watch the debate and vote on the like-kind exchange amendment here.
Roundtable Infrastructure Town Hall
- The Roundtable held an all-member Infrastructure Town Hall on Aug. 12 to discuss the Senate reconciliation measure and what it means for commercial real estate. Rep. Tom Suozzi (D-NY), a member of the tax-writing House Ways and Means Committee, center in photo, joined Roundtable Chair John Fish, top right, Jeffrey DeBoer, top left, and other Roundtable staff for the Town Hall discussion.
- The Roundtable Town Hall addressed many intertwined policy issues in both infrastructure packages that are summarized in the following Roundtable documents: :
- A link to the Town Hall will be sent to all Roundtable members next week. The Roundtable’s website also features links to find your members of Congress to send your views on the infrastructure proposal’s potential impact on CRE tax priorities, along with talking points.
The congressional debate on infrastructure is expected to extend into the fall, when policymakers face multiple other deadlines that converge on Sept. 30 – government funding for FY2022, reauthorization of funding for surface transportation programs, and reauthorization of the National Flood Insurance Program. The Roundtable is scheduled to discuss all these issues at its Fall Meeting on Oct. 5 in Washington, DC (Roundtable-level members only).
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Commercial Real Estate Leaders Report Improving Market Conditions Amid Uncertain Return-to-Office Trends
Commercial real estate executives report improving market conditions, through consistent growth of various asset classes, despite uncertainty surrounding employees returning to the office, according to The Real Estate Roundtable’s Q3 2021 Economic Sentiment Survey released today. The report shows the continued positive momentum for industrial, multifamily and single-family assets, with hospitality continuing to improve with increased travel.
- “As the commercial real estate industry continues to adapt in the face of the global pandemic, we recognize the changing demands and expectations for hospitality, shopping centers, office buildings, travel and convening spaces,” said Real Estate Roundtable President and CEO Jeffrey DeBoer. “Strong, stable and growing real estate markets can be a driving force for the nation’s economic recovery, and contribute productively to a world struggling to overcome COVID and its variants. Investment in these reimagined spaces presents the opportunity to move the economy forward for the benefit of all Americans.”
- The Roundtable’s Q3 Current Conditions Index of 85 increased 7 points from the previous quarter, the highest index recorded in its thirteen year history.
- The Economic Sentiment Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive. The Roundtable’s Overall Q3 2021 Sentiment Index registered at 78 – a one-point increase from the previous quarter.
- The Roundtable’s quarterly survey shows that 89 percent of respondents believe that general market conditions today are “much better or somewhat better” versus one year ago – with an abundance of available capital compared to one year ago.
- However, this quarter’s Future Conditions Index of 71 decreased 4 points compared to last quarter, indicating uncertainty still remains while the country continues to recover from the COVID-19 crisis.
- The Q3 2021 Real Estate Roundtable Sentiment Index registered a score of 78, an increase of 1 point from the second quarter of 2021 and a 36-point increase over Q3 2020. The speed of the economic recovery compared to only 6 months ago has provided more clarity and certainty for specific asset classes, with the biggest looming question marks being the impact of employees returning to the office and rising inflation risk.
- Industrial performed exceptionally well throughout the pandemic and has maintained positive momentum through the first half of 2021. Additionally, multifamily and single-family suburban assets continue to attract strong demand. Previously challenged assets such as hospitality have rebounded and remain hopeful to reach pre-pandemic levels with increased travel and employees returning to the office.
- Assets classes with durability or the perception of durability such as high-quality multifamily, long-term net lease office, and industrial have all hit record levels, all while certain sectors and regional markets (in particular, those relying heavily on mass transit) have yet to fully recover.
- Respondents cited a continued abundance of available debt and equity capital, which has led to significant amounts of capital sitting on the sidelines waiting for attractive deployment opportunities.
- DeBoer also noted, "Historically, the real estate industry has played a pivotal role in catalyzing economic recovery following national and worldwide events, and we have the opportunity to play that role again. With the recent infrastructure policy developments in Washington, it is a once-in-a-generation opportunity to rebuild cleaner, safer, and more climate-friendly buildings. With private capital readily available for investment, we are hopeful federal and public private partnerships will continue to fuel job creation and equitable economic development needed to continue the progress made in the economic recovery.”
Data for the Q3 survey was gathered in July by Chicago-based Ferguson Partners on The Roundtable’s behalf. For the full Q3 report, visit here.
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