Coronavirus Response - Public Health Policy

Emergency Coronavirus Response Package Enacted, Fed Attempts to Blunt Economic Impact with Interest Rate Cut

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This week congressional policymakers overwhelmingly passed, and President Trump signed, an $8.3 billion emergency spending package to combat the coronavirus outbreak in the U.S. – after the Fed reduced interest rates by a half-point amid early signs of economic disruption.

  • The president signed the emergency funding bill Friday morning. “We’ve signed the 8.3 billion,” Trump said. “I asked for two and a half and I got 8.3 and I’ll take it.”   (The Hill, March 6)  Photo above:  President Trump, with Secretary of Health and Human Services Alex Azar, signs the coronavirus bill into law.
  • The package – H.R. 6074 (116) – will bolster vaccine development and research, increase equipment stockpiles, and support state and local health responses to a virus that has sickened more than 160 people in more than a dozen states.  (NY Times U.S. coronavirus map and Center for Disease Control and Prevention updates)
  • As questions remain about the severity and spread of the illness, the stock market continued to experience historic gyrations this week, with falling yields exerting wide-ranging effects on borrowing costs and bank profitability. (Wall Street Journal, March 5)
  • In an effort to contain the coronavirus's economic fallout, Fed Chairman Jay Powell announced on March 3 a cut in the federal funds rate cut to a range of 1 to 1 ¼ percent – the largest emergency cut to interest rates since the 2008 financial crisis.  The Fed’s Open Market Committee is scheduled to meet again on March 17-18 to issue updated economic forecasts and any further change to the current federal funds rate.
  • Powell said, "The virus and the measures that are being taken to contain it will surely weigh on economic activity both here and abroad for some time.”  He added, “We are beginning to see the effects on the tourism and travel industries, and we are hearing concerns from industries that rely on global supply chains.”  He added, "We don't think we have all the answers, but we do believe that our action will provide a meaningful boost to the economy."  (Powell’s press conference transcript). 
  • The Federal Reserve’s latest nationwide survey of business conditions shows that that half of the central bank’s districts — Philadelphia, Cleveland, Richmond, Chicago, Dallas and San Francisco — were reporting impacts from the coronavirus in tourism and manufacturing chains.  (The Fed’s Beige Book, March 4)
  • The U.S. Travel Association (USTA) on Tuesday issued a report that supports the Fed’s findings.  USTA predicts a 6 percent plunge over the next three months in international inbound travel to the United States, which could result in a loss of two to three billion dollars – the largest dip in global visitation since the financial crisis. About 79.3 million international visitors came to the U.S. last year.  (USTA Travel Trends Index, March 3)
  • [The Real Estate Roundtable is part of the Visit U.S. Coalition, led by the U.S. Travel Association (USTA) and the American Hotel and Lodging Association.]
  • The potential impact of coronavirus on the economy and commercial real estate was part of a recent discussion between Real Estate Roundtable President and CEO Jeffrey DeBoer and Brookfield Property Partners Chairman Ric Clarke at Colorado University’s Annual Real Estate Forum (see photos here). DeBoer was also interviewed partly about the coronavirus outlook by Rosen Consulting Group’s Chairman Ken Rosen during the Pension Real Estate Association’s Spring conference this week.
  • Coronavirus-related updates and resources are available to the commercial real estate industry through the RE-ISAC’s #COVID Section, which includes:
  • Coronavirus Disease 2019 (COVID-19) Situation Summary, last update March 3.
  • Novel Coronavirus (2019-nCoV) in the U.S., March 5 update.

The potential impact of coronavirus on the health of global markets and the U.S. economy; commercial real estate sectors and the industry’s response; and how it may affect the routines of millions in American society, will be a focus during The Roundtable’s March 31 Spring Meeting in Washington, DC.

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Housing and Land Use Policy

House of Representatives Passes Affordable Housing Bill to Reduce Zoning Barriers with No Opposition

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The United States House of Representatives on Monday passed the bipartisan Yes in My Backyard (YIMBY) Act (H.R. 4351) on a voice vote, following last week’s unanimous approval by the House Financial Services Committee.  (Roundtable Weekly, Feb. 28, 2020)

  • Sponsored by Reps. Denny Heck (D-WA) and Trey Hollingsworth (R-IN), the YIMBY Act avoids a mandate from Congress to compel cities and towns to enact certain land use laws.  Municipalities that receive HUD’s Community Development Block Grants (CDBG) would be discouraged from limiting housing supplies through reporting on and disclosing their land use and zoning policies that inhibit high density land uses. 
  • The YIMBY Act would direct a community receiving federal CDBG money to consider, track, and report on implementation of over 20 pro-housing strategies, such as:

    • Enacting high-density zoning, and expanding by-right multifamily zoned areas;

    • Allowing manufactured homes and accessory dwelling units on single-family lots;

    • Reducing minimum lot sizes;

    • Increasing allowable floor area ratios for multifamily projects;

    • Providing property tax abatements to existing home owners to garner support for high development densities in their communities; and

    • Ensuring that impact fees paid by developers accurately reflect infrastructure needs generated by new units.

  • “Sunlight is the best disinfectant and we need to identify and reduce barriers to housing construction at the local level,” Heck said following the House vote. “I am proud that Congress is taking a critical first step towards bringing relief to cost-burdened renters and homeowners across America.”  (Heck press release, March 2.)
  • “We want more affordable homes for American families,” Hollinsgworth said on Monday.  The YIMBY Act’s unanimous approval “signals strong support across the aisle to reform our nation’s housing regulations at all levels of government.” (Hollingsworth Press Release, March 2)
  • The Roundtable joined Feb. 24 and March 2 coalition letters signed by real estate, “smart growth” and subsidized housing advocates, in a show of wide stakeholder support for the YIMBY Act.
  • Speaking at the 2020 Pension Real Estate Association Spring Conference this week Roundtable President and CEO Jeffrey D. DeBoer, said: “The Roundtable has long recognized that safe, decent, and affordable housing is essential to the well-being of America’s families, communities and businesses. The YIMBY Act is a positive first step in eliminating discriminatory land use polices and removing barriers that prevent much needed affordable housing from being built throughout the country.”

The Roundtable and coalition partners will continue to urge lawmakers to make progress on the YIMBY Act in the Senate and similar legislation that eases burdensome rules that inhibit affordable housing development.

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Energy Policy

Senate Committee Considering Comprehensive Energy Bill that Includes Roundtable-Supported Measures

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A bipartisan, omnibus energy bill with provisions supported by The Real Estate Roundtable was prepared for debate in the Senate this week, as Republicans and Democrats negotiate a package of amendments that may be added to the base bill.  

  • The American Energy Innovation Act (S. 2657) – introduced on Feb. 27 by Senate Energy and Natural Resources Committee Chairman Lisa Murkowski (R-AK) and Ranking Member Joe Manchin (D-WV) [ above ] – is a compilation of more than 50 energy-related measures considered and individually reported last year.  (Bill Summary and text)
     
  • The AEIA focuses on energy efficiency, renewable energy, energy storage, carbon capture, grid modernization, and workforce development to build energy-related infrastructure.
     
  • The bill includes language supported by The Roundtable to improve the Commercial Building Energy Consumption Survey (CBECS) process. 

    • AEIA Section 1001 would require Congress to oversee coordination by federal agencies to gather and report higher quality CBECS data – the only nationwide government survey that estimates the number, location, age, energy consumption and other characteristics of the U.S. commercial real estate stock.

    • Significantly, CBECS data provides the underpinning for EPA's ENERGY STAR scores – a key real estate performance “label” relied upon by building owners, investors, and tenants.

  • The Senate’s AEIA bill includes other sections of interest to real estate, including authorizations for:  

    • a “Federal Smart Building Program” to implement and demonstrate smart building technologies across the federal real estate stock; 

    • a nationwide survey of “Private Sector Smart Buildings” for study and evaluation by the U. S. Energy Secretary; 

    • codification of the U.S. Energy Department’s “Better Buildings Challenge” – a program that has attracted Roundtable members’ participation; and

    • a “CHP Technical Assistance Partnership” to provide project-specific engineering and economic assessments for combined heat and power systems.

     

  • Thus far, Senators have filed over 185 amendments for consideration as additions to the underlying bill.  Among them is one offered by Senators Rob Portman (R-OH) and Jeanne Shaheen (D-NH) to drive greater transparency and consideration of building owner costs in the process to develop model building energy codes.  (Roundtable Weekly, July 19, 2019).   The Roundtable has long-supported the Portman-Shaheen energy codes provisions, which Portman addressed this week on the Senate floor
  • ENR Chairman Murkowski said this week she was working on a “managers’ package” of certain, less controversial measures to be voted on in a block.  “I want to have a managers' package, but it is entirely possible — we've seen it before — that that opportunity is spoiled,” she said.  (CQ, March 4) 

If Republicans and Democrats can agree upon the AEIA amendments eligible for a vote, the Senate will be poised to pass its first major piece of energy legislation in over 12 years, according to Murkowski’s press release.  The measure would then move to the House of Representatives, where the Democratic majority might append provisions that more aggressively address climate change.  (Roundtable Weekly, Feb. 7, 2020) 

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Tax Policy

Treasury Secretary Mnuchin Addresses FIRPTA Reform at House Ways and Means Hearing

 

Testifying before the House Ways and Means Committee on the President’s FY 2021 budget, Treasury Secretary Steven Mnuchin was questioned this week on the Foreign Investment in Real Property Tax Act (FIRPTA) and addressed potential steps he could take to encourage greater real estate investment from abroad.  (Watch 2:35 video of March 3 exchange with Mnuchin)

  • During the hearing’s Q&A with Secretary Mnuchin, committee member Kenny Marchant (R-TX) noted a recent letter that he and other GOP taxwriters sent to the Treasury Department urging a reevaluation of FIRPTA and related IRS guidance (Notice 2007-55).  
  • The congressional letter, led by Ways and Means Republican Devin Nunes (R-CA), encourages Treasury to withdraw section two of the IRS Notice, which effectively imposes U.S. capital gains tax on the liquidating distributions of domestically controlled real estate investment trusts (REITs).   Often, when a foreign investor is a minority partner in a U.S. real estate or infrastructure investment, the joint venture employs a domestically controlled REIT structure.
  • The 16 signatories of the February 20 letter wrote, “repealing the IRS Notice will restore the intent of Congress with respect to the tax law governing liquidations, provide parity to investors, and increase direct foreign investment in U.S. commercial real estate and infrastructure in every corner of the nation.”
  • During the hearing, Rep. Marchant called attention to the letter – and noted the IRS guidance applies FIRPTA to previously untaxed transactions involving domestically controlled REITs.  
  • Mnuchin responded that the Feb. 20 letter prompted a briefing at Treasury this week – and that he shares the concerns the letter  raises about FIRPTA.  "[I]t makes no sense that we discriminate against foreign investors," Mnuchin said.  “But in my mind, anything we can do legally to encourage those investments we will do.  So thank you for the letter.  We are reviewing it.  It is at the top of my list,” he added. (Watch 2:35 video of Marchant and Mnuchin)
  • During another Ways and Means tax hearing last month, Rep. Marchant said, “FIRPTA is an outdated, discriminatory law.  It applies to no asset class other than real estate and infrastructure ... Economic studies indicate repealing FIRPTA could drive $65 to $125 billion in new investment.”  (Watch video of Feb. 11 FIRPTA exchange).  Rep. Marchant is lead sponsor of the bipartisan Invest in America Act (H.R. 2210), a bill that would repeal the entire FIRPTA law. 
  • A similar letter was sent on December 18, 2019 to Secretary Mnuchin by a bipartisan group of 11 Senate Finance Committee Members led by Sen. Robert Menendez (D-NJ) – a longtime lead sponsor of FIRPTA repeal bills.  Another bipartisan letter to Secretary Mnuchin urging repeal of the IRS Notice was signed by 32 Representatives of the House Ways and Means shortly before introduction of the Tax Cuts and Jobs Act of 2017 (TCJA). (Roundtable Weekly, Dec. 20, 2019)

Members of the Roundtable’s Tax Policy Advisory Committee (TPAC) have met with Treasury officials on multiple occasions to discuss the harm caused by IRS Notice 2007-55.  Leading industry experts also convened on Oct. 30 at the National Press Club in Washington for an in-depth discussion the economic damage incurred by the IRS Notice.  An industry coalition is scheduled to meet with officials in Treasury's Office of Tax Policy next week to discuss the issue.

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