Infrastructure

Bipartisan “Physical” Infrastructure Agreement Announced; Separate Package on “Social Infrastructure” Tied to Reconciliation Path

Infrastructure Chicago interexchange

President Joe Biden and a bipartisan group of senators yesterday announced a tentative agreement to address the nation’s “physical” infrastructure – as Democrats indicated that its passage into law would depend on enactment of a separate, much larger “social” infrastructure bill structured to bypass Republican votes through a budget “reconciliation” process. 

Goals and Pay-Fors 

  • The total cost of the physical infrastructure deal, according to the White House, is $1.2 trillion over eight years, with $579 billion in new spending for investments in transit, roads, bridges, the electrical grid, and other systems. (White House Fact Sheet, June 24)

  • The 21-member bipartisan Senate group also released a document outlining how the agreement would be funded while avoiding new taxes. Among the pay-fors listed: 

    • Leverage private sector investment through incentivizing use of public private partnerships, expanding use of Private Activity Bonds, and encouraging asset recycling.

    • Create direct-pay municipal bonds to attract more investment in public infrastructure.

    • Repurpose unused COVID relief funds. 

Jeff DeBoer RER Meeting

  • Roundtable President and CEO Jeffrey DeBoer, above, said, “Americans depend on safe and efficient roads, bridges, and mass transit to commute all across the country. Our nation’s buildings and the people in them depend on reliable supplies of water, power, and broadband to function, and meet the evolving demands of business and individual tenants. In turn, infrastructure and real estate are synergistic, and have a two-way relationship.”

  • DeBoer added, “The package has potential to impact GDP, promote job growth, keep the U.S. competitive with other countries that are massively investing in their own infrastructure, and expand the overall economy.”

Next: Reconciliation

Capitol Hill trees clouds in the evening

  • President Biden said that signing the bipartisan physical infrastructure deal into law would be contingent on a separate bill addressing his administration’s “social infrastructure” agenda on matters such as education and child care. “If the [physical infrastructure bill] is the only one that comes to me, I’m not signing it.” Biden said (Wall Street Journal, June 24)

  • Democratic leaders are aiming to move the “social” infrastructure bill through the budget reconciliation process which would only require a simple, 51-vote majority in the Senate. (NPR, June 24)

  • House Speaker Nancy Pelosi (D-CA) said yesterday, “We will not take up a bill in the House until the Senate passes the bipartisan bill and a reconciliation bill. If there is no bipartisan bill, then we'll just go when the Senate passes a reconciliation bill.” (The Hill, June 24)

  • Senate Majority Leader Schumer stated his timeline is to have both the bipartisan infrastructure bill and the budget reconciliation bill passed in July. (Politico, June 24) 

Housing -- New FHFA Director 

FHFA logo
  • President Biden on June 23 removed Fannie Mae and Freddie Mac’s chief regulator, hours after the U.S. Supreme Court ruled that the Federal Housing Finance Agency’s (FHFA) loan director is insufficiently accountable to the president. (CNBC and BloombergLaw, June 23)

  • Mark Calabria, a Trump administration appointee, focused much of his efforts at FHFA trying to end Fannie and Freddie’s 12 years under government conservatorship. A Biden White House official said, “It is critical that the agency (FHFA) implement the Administration’s housing policies.” (CNBC, June 23)

  • Calabria was replaced on an acting basis with FHFA Deputy Director Sandra Thompson. Since 2013, Thompson has led FHFA’s housing and regulatory policy, capital policy, financial analysis, fair lending and all mission activities for Fannie Mae, Freddie Mac and the Federal Home Loan Banks. (FHFA statement, June 24) 

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) works on issues related to Fannie Mae and Freddie Mac and their impact on commercial real estate.

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Eviction Moratorium

CDC Issues Final Extension of National Eviction Moratorium until July 31; California Plans to Reimburse Housing Providers for Past-Due Rent

CDC sign outdoor

The Centers for Disease Control and Prevention (CDC) yesterday issued a final extension of the national moratorium on evictions through July 31 as the Biden administration announced a series of actions involving several federal agencies on housing affordability and evictions. (White House Fact Sheet, Associated Press, Washington Post and New York Times, June 24)

Sluggish Aid Distribution

  • The CDC indicated its action would be the final extension of the federal-level tenant eviction moratorium, first enacted by Congress in March 2020 through the CARES Act pandemic relief law. “Keeping people in their homes and out of crowded or congregate settings — like homeless shelters — by preventing evictions is a key step in helping to stop the spread of COVID-19,” according to the June 24 CDC announcement. (Congressional Research Service, Federal Eviction Moratoriums)

  • The extension also allows more time for federal officials to improve the sluggish distribution of billons in pandemic housing aid authorized by Congress. The urgent financial needs of millions of tenants nationwide have overwhelmed local officials struggling to provide financial assistance under current rules. (Wall Street Journal, June 7)

  • The White House’s announcement yesterday of actions to help state and local governments prevent evictions included a planned summit on housing affordability and evictions, along with new guidance from the Treasury Department aimed at streamlining distribution of emergency aid for renters behind on payment to their housing providers.

  • The Federal Housing Finance Agency (FHFA) yesterday also extended the foreclosure moratorium for mortgages backed by Fannie Mae and Freddie Mac until July 31. (FHFA news release)

Tenants and Housing Providers

  • The National Multifamily Housing Council (NMHC) on June 24 stated, “The continuation of a nationwide, one-size-fits-all, federal eviction moratorium is out of step with the significant progress made in controlling COVID-19 and restoring the economy. Instead of this blanket federal policy, this pandemic has already shown that targeted, efficient relief works.   

  • The statement also noted that earlier this month NMHC released Principles to Work with Residents, which offer practical steps housing providers can take to work hand-in-hand with residents and demonstrate the good faith with which property owners and managers have supported their residents.  

State and Local Action

California Governor Gavin Newsom
  • California Gov. Gavin Newsom, above, and state legislators today agreed to a plan to reimburse housing providers for past-due rent incurred by lower-income tenants during the state’s pandemic eviction moratorium – along with an extension of the moratorium until Sept. 30. (Los Angeles Times, June 25)

  • A senior housing advisor to Newsom told the Associated Press that California likely has enough money from the $5.2 billion in multiple aid packages approved by Congress to cover all of the unpaid rent in the state.

  • Other states and cities have a variety of deadlines related to their own eviction moratoria. CNBC reports that at least 28 state rental aid programs bar landlords from evicting tenants for at least the time period covered by the aid – and in some cases for between 30 and 90 days afterward.

The Roundtable is part of a broad real estate coalition that has consistently urged state, county and municipal officials to distribute the billions in allocated federal funds as soon as possible. (Coalition letter, April 15)

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Tax Policy

Roundtable-backed Bipartisan Bill Would Correct Condo Construction Tax Accounting Issue; Roundtable Joins Coalition Letter in Defense of Pass-Through Deduction

residential construction condo

Two senior members of the House Ways and Means Committee introduced bipartisan legislation this week that would correct current condominium tax accounting rules.

Condo Accounting Relief

  • House Ways and Means Committee members Bill Pascrell Jr., (D-NJ) and Vern Buchanan, (R-FL) on June 22 announced the Fair Accounting for Condominium Construction Act to encourage greater housing development in high-population and high density-areas. (Pascrell news release)

  • Current condo tax accounting rules require multifamily developers of condominium buildings with five or more residential units to recognize income and pay tax on their expected profit as construction is ongoing — well before pre-sale transactions are closed and full payment is due from the buyer.

  • Homebuilders of single-family homes, townhouses and row houses are not subject to this percentage-of-completion tax accounting rule restriction. As a result, current tax accounting rules discriminate against vertical condominium by unfairly accelerating federal income tax liability for new condominium construction.

  • Rep. Pascrell’s legislation would provide for an exclusion from the percentage-of-completion method for condo construction.

Roundtable Endorsement

  • Roundtable President and CEO Jeffrey DeBoer said, “The Pascrell-Buchanan legislation will modernize the outdated percentage-of-completion tax accounting rules that discriminate against condominium construction. The bill will reduce the cost of building new housing, especially in high-cost areas where greater density is needed. The Real Estate Roundtable commends the sponsors for introducing a common sense measure that, when enacted, will help expand the nation’s housing supply.” (Pascrell news release)

Section 199A Support

Sen. Ron Wyden with American flag
  • Separately, The Roundtable, as part of a broad business coalition, this week also weighed in on the 20-percent tax deduction for qualified business income (Section 199A), which was enacted as part of the 2017 Tax Cuts and Jobs Act. (Roundtable Weekly, April 2)

  • Senate Finance Committee Chairman Ron Wyden (D-OR), above, reportedly plans to propose changes to Section 199A affecting partnerships, LLCs, and other entities taxed only at the individual owner level. According to BloombergTax, Wyden’s legislation, which is still being drafted, will likely aim to start phasing out the deduction for individuals making above $400,000 in annual business income. Wyden also plans to keep the deduction in place until it is scheduled to expire at the end of 2025.

  • The business coalition’s June 22 letter to the leadership of the tax-writing Senate Finance and House Ways and Means Committees expressed strong opposition to any reductions or repeal of the Section 199A deduction, including phasing out the deduction above certain income thresholds.

  • The coalition’s letter emphasizes how nearly 40 percent of individually- and family-owned businesses closed their doors during the COVID pandemic – and that Section 199A provided critical tax relief.

The June 22 letter adds, “Proposals to limit or repeal the deduction would hurt Main Street businesses and result in fewer jobs, lower wages, and less economic growth in thousands of communities across the country. Such changes would amount to a direct tax hike on America’s Main Street employers, a key reason why the tax plan released by the White House in March left the deduction fully intact.”

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