Rep. Jimmy Gomez (D-CA), above, and nine other House Democrats last week urged federal banking regulators to incentivize conversions of commercial real estate to other uses. Rep. Gomez previously introduced the Roundtable-supported Revitalizing Downtowns Act (H.R. 4759) in 2021 to encourage adaptive use of older buildings. Sen. Debbie Stabenow (D-MI) also introduced companion legislation in the Senate (S. 2511). (Rep. Gomez news release, July 31)
Federal Regulators & CRE Conversions
- The recent letter to Fed Chairman Jerome Powell and other regulators stated that the congressional policymakers are concerned how the COVID-19 pandemic continues to exert a negative influence on markets and regional banks. “We are especially interested in the impact of this instability on the $6 trillion dollar market for retail and office space CRE, which has been unduly impacted by pandemic related disruptions,” the letter states.
- The letter also noted, “It is essential that all arms of the federal government take prudent steps to limit the impact of a CRE market contraction, and innovate to encourage reuse of vacant commercial space as a potential source of housing.” (Rep. Gomez news release, July 31)
Legislation & Tax Credits
- On Oct. 12, 2022, a Roundtable-led coalition of 16 national real estate organizations urged Rep. Gomez and Sen. Stabenow to consider certain enhancements and expansions to the Revitalizing Downtowns Act’s 20% tax credit for qualified property conversion expenditures. (Real Estate Coalition letter)
- The bill’s property conversion measure was modeled on the historic rehabilitation tax credit and could be used for office buildings that are at least 25 years old at the time of conversion. The industry’s recommendations included expanding the category of properties eligible for the credit to various types of commercial buildings such as shopping centers and hotels. (GlobeSt and Roundtable Weekly, Oct. 2022)
- The Senate addressed the Revitalizing Downtowns Act as part of a March hearing on Tax Policy’s Role in Increasing Affordable Housing Supply for Working Families. Sen. Stabenow engaged hearing witness and National Multifamily Housing Council President Sharon Wilson Géno about a joint NMHC and Urban Land Institute study on adapting CRE to residential use.
White House Initiative
- The Roundtable on Dec. 12, 2022 urged the Biden administration to support “legislation to facilitate the increased conversion of underutilized office and other commercial real estate to much-needed housing.” (RER letter to President Biden, Dec. 12 andGlobeSt, Aug. 8)
- Last month, the administration announced a new initiative that will establish a multi-agency working group to “develop and advance federal funding opportunities” for commercial-to-residential conversions that would help increase the supply of energy-efficient affordable housing. (Reuters and HousingWire, July 27 | Roundtable Weekly, July 28)
New CRE Conversion Study
- A new analysis from researchers at New York University and Columbia University explores the potential for renewable energy investment tax credits in the Inflation Reduction Act to help subsidize CRE adaptive use and green conversions. (National Bureau of Economic Research)
- The August study, Converting Brown Offices to Green Apartments, also notes the significant role that local zoning laws, permitting policies, and building codes could play in encouraging CRE conversions. The authors conclude that about 11% of commercial office buildings in the 105 largest cities are candidates for conversion, and that an estimated 400,000 new apartment units could be created. (Axios, Aug. 8)
A property conversions working group created by The Real Estate Roundtable’s Tax Policy Advisory Committee will continue to respond to legislative proposals affecting potential property conversion activities.
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