News Type: Roundtable Weekly

House Committee Unanimously Advances Bill to Reduce Zoning Barriers to Affordable Housing

Posted on by Trey Jackson
  • The Real Estate Roundtable joined a Feb. 24 coalition letter to support H.R. 4531, the Yes in My Backyard (“YIMBY”) Act. The bipartisan bill – sponsored by Reps. Denny Heck (D-WA) and Trey Hollingsworth (R-IN) – would direct local governments that receive HUD Community Development Block Grants (“CDBGs”) to develop favorable planning and zoning strategies that enable affordable housing development.
  • “We have a national housing crisis, one that is brought on in part by zoning and land use policies,” Rep. Heck said upon the Committee’s approval of the bill today with no opposition.  “The YIMBY Act is a crucial first step to addressing these policies in order to increase affordability and construction.”  (Heck-Hollingsworth joint press release)
  • The YIMBY Act respects federalism principles and avoids a mandate from Congress to compel cities and towns to enact certain land-use laws.  Rather, the bill aims to discourage localities from limiting housing supplies through reporting and disclosure rules attendant to HUD’s grant process.
  • Specifically, the YIMBY Act directs that a community receiving CDBG money must consider and track 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.
  • Speaking at the Annual Real Estate Forum held at the University of Colorado (Boulder) this week, Roundtable President and CEO, Jeffrey D. DeBoer, said:  “The YIMBY Act recognizes that local zoning ordinances coupled with lengthy duplicative permitting hurdles frequently result in decreased housing availability and increased housing costs.  Asking local authorities to report on their efforts to ease these regulatory hurdles makes a lot of sense.”  DeBoer and Roundtable board member Ric Clark (Senior Managing Partner and Chairman, Brookfield Property Group) focused their keynote presentation at the event on national policy issues, including housing affordability, as well as current and expected trends in national real estate markets.
  • The Roundtable urged support for the YIMBY Act in comments filed with HUD in January.  (Roundtable Weekly, Jan. 17, 2020). Companion legislation is pending in the Senate (S. 1919), sponsored by Todd Young (R-IN) and Brian Schatz (D-HI).  The bill also reflects the goals of President Trump’s Executive Order for “ Eliminating Regulatory Barriers to Affordable Housing.” (Roundtable Weekly, June 28, 2019)
  • The National Multifamily Housing Council (NMHC) and National Apartment Association (NAA) issued a statement praising the Committee’s action on the YIMBY Act – and also noted the successful markup of the Housing is Infrastructure Act (H.R. 5187), sponsored by Chairwoman Maxine Waters (D-CA).  H.R. 5187 would direct greater investments to construct new affordable housing units for low-income households, persons with disabilities, and the elderly.  It would also provide more federal funding to build, repair and modernize public housing.
  • A bill similar to the YIMBY Act — that uses the “carrot” of federal grants to incentivize high density land uses – is the Build More Housing Near Transit Act (H.R. 4307).  While the YIMBY Act leverages HUD CDBG dollars, H.R. 4307 leverages Federal Transit Administration grants to require local authorities to evaluate housing development along proposed rail, bus, and other mass transit routes.  H.R. 4307 is under consideration as part of “must pass” infrastructure legislation to reauthorize the Highway Trust Fund, which is scheduled to expire on Sept 30. (Roundtable Weekly, Oct. 4, 2019)

The strong bipartisan showing for the YIMBY Act at the Committee level bodes well for full House consideration in the coming weeks.  While the path forward in the Senate is presently unclear, The Roundtable and coalition partners will continue to press lawmakers to make progress on the YIMBY Act and similar legislation.

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House Ways & Means Republicans Ask Treasury Secretary Mnuchin to Boost Investment, Create Jobs by Easing FIRPTA Tax Burden

Posted on by Trey Jackson

Treasury Department

Over three-quarters of the Republican Members of the House Ways and Means Committee on Feb. 20 urged Treasury Secretary Steven Mnuchin to remove tax barriers to foreign investment in U.S. real estate and infrastructure.  

  • The congressional letter, led by Representative Devin Nunes (R-CA), encourages Treasury to withdraw section two of IRS Notice 2007-55.  The Notice, which relates to the Foreign Investment in Real Property Tax Act (FIRPTA), effectively imposes U.S. capital gains tax on the liquidating distributions of a domestically controlled REIT. 
  • Domestically controlled REITs commonly are employed in joint ventures where a foreign investor is a minority partner in a U.S. real estate or infrastructure investment.  Prior to the Notice, a liquidating distribution from a domestically controlled REIT was treated as nontaxable sale of stock for tax purposes. 
  • The 16 signatories of the February 20 letter wrote that “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.”
  • The Ways and Means Republican letter comes on the heels of a high-profile exchange on the broader economic harm caused by FIRPTA at a recent Ways and Means tax hearing.  At the hearing, Rep. Kenny Marchant (R-TX), said that “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.” Rep. Marchant is lead sponsor of the bipartisan Invest in America Act (H.R. 2210), a bill to repeal FIRPTA altogether.  (Watch video of Feb. 11 FIRPTA exchange)
  • In conjunction with The Roundtable’s Tax Policy Advisory Committee (TPAC) meeting on January 29, Darin Mellott, Director of Americas Research at CBRE shared updated data indicating that foreign capital represented only 10 percent of total transaction volume between 2007 and 2019 – further evidence that FIRPTA weighs heavily on potential inbound investment.  In other asset classes, such as manufacturing, foreign capital represents a much larger share of overall investment. 
  • A letter similar to the House Republican letter was sent by a bipartisan group of 11 Senate Finance Committee Members to Secretary Mnuchin on December 18, 2019.  The December letter was led by Sen. Robert Menendez (D-NJ), a longtime lead sponsor of bills to roll back FIRPTA, and Sen. Johnny Isakson (R-GA).  A bipartisan House Ways and Means Committee letter urging repeal of the Notice and signed by 32 Representatives was sent to Secretary Mnuchin 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 have met with Treasury officials on multiple occasions to discuss the harm caused by IRS Notice 2007-55.  Since 2017, Treasury’s regulatory agenda has focused on implementing the TCJA.  With TCJA implementation nearly complete, The Roundtable is now urging Treasury officials to give the Notice the attention it merits.

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Commercial Real Estate Executives Report Balanced Real Estate Market Conditions Supported by Stable Economy

Posted on by Trey Jackson

 

The Real Estate Roundtable’s 2020 Q1 Economic Sentiment Index released this week registered a three point increase over the 2019 fourth quarter index. Commercial real estate (CRE) industry executives continue to experience generally balanced market fundamentals across nearly all product types, with limited overbuilding and conservative overall industry debt. CRE executives also positively noted the continued macro-economic job growth and low interest rates. Election year politics and international tensions somewhat temper the overall optimistic sentiment causing some CRE executives to prepare for potential market disruptions later in 2020.    

“As our Q1 index shows, we are beginning a new decade optimistic about continued overall economic growth,” said Roundtable President and CEO, Jeffrey D. DeBoer. “Commercial real estate markets remain fundamentally sound; supply and demand are in relative balance; debt and equity capital markets are functioning and disciplined; wages are rising; and, unemployment is low,” DeBoer added.   

The Roundtable’s Q1 2020 Sentiment Index registered at 52 – a three point increase from the previous quarter.  [The 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.]  This quarter’s Current-Conditions Index of 55 increased two points from the previous quarter, while this quarter’s Future-Conditions Index of 50 came in at five points higher compared to Q4 2019.

The report’s Topline Findings include:

  • The Real Estate Roundtable Q1 2020 Sentiment Index registered a score of 52, a three point increase over the last quarter of 2019. Respondents feel the overall economy is stable and the commercial real estate market continues to be supported by strong market fundamentals. Many respondents have stopped attempting to predict an end to this cycle as they see no apparent economic hurdles to current market stability.

  • Despite respondents finding comfort with the current market climate, many are anticipating two phases of the 2020 calendar year: pre-election and post-election. Many noted that election years are notoriously unpredictable and point to a large volume of transactions already underway as platforms attempt to execute before the summer.

  • Asset values remain elevated across most property types and geographies. While certain respondents suggest that asset values have room to grow, others view current pricing as being at peak levels.

  • Debt and equity capital are perceived as widely available in most markets. Many respondents noted the high level of discipline they are witnessing in the debt markets on behalf of lenders. This level of discipline suggests a healthy state in the capital markets, and is a contributing factor to the continuation of the current cycle.

DeBoer noted, “There is natural concern regarding the uncertainty of the coming presidential election.  However, the commercial real estate industry’s leading executives are positive about today’s economy and optimistic about future market conditions.  As the year progresses, The Roundtable will continue working with national policymakers to maintain and strengthen pro-growth policies to create jobs, expand housing opportunities, and benefit the overall economy.”

Data for the Q1 survey was gathered in January by Chicago-based FPL Associates on The Roundtable’s behalf.  For the full survey report, visit http://www.rer.org/Q1-2020-Sentiment-Index/

 

White House Report: Over-Regulation Constrains Housing Supplies; Walker & Dunlop Report Considers Barriers, Solutions to Improve Housing Affordability

Posted on by Trey Jackson

2020 CEA Annual Report

The Trump Administration yesterday issued its Council of Economic Advisers’ 2020 Annual Report, which warns that regulatory constraints on affordable housing development in key markets drive up costs, increase homelessness and pose a potential threat to U.S. economic growth.  (White House, Feb. 20)

  • The White House report also lists issues such as the opioid crisis as a drag on the historic economic expansion, while focusing on affordable housing constraints as a major impediment.  (PoliticoPro, Feb.20)
  • “We find that a key driver of the housing unaffordability problem is the overregulation of housing markets by State and local governments, which limits supply,” the report states. “By driving up home prices, overregulation adversely affects low-income Americans in particular, who spend the largest share of their income on housing.”
  •  To illustrate how rising housing unaffordability in U.S. real estate markets adversely affects economic growth, the report profiles 11 supply-constrained geographic areas.  The report finds that deregulation in these areas would increase affordability enough to reduce homelessness by an estimated 31 percent on average. 
  • The report explains, “Such overly restrictive regulations include zoning and growth management controls, rent controls, building and rehabilitation codes, energy and water efficiency mandates, maximum-density allowances, historic preservation requirements, wetland or environmental regulations, manufactured-housing regulations and restrictions, parking requirements, permitting and review procedures, investment or reinvestment tax policies, labor requirements, and impact or developer fees.”
  • The Trump Administration has focused on deregulation by establishing the White House Council on Eliminating Regulatory Barriers to Affordable Housing, while the Department of Housing and Urban Development (HUD) is encouraging State and local governments to focus on increasing housing supply in areas where supply is constrained. (Roundtable Weekly, June 28, 2019)
The Roundtable on Jan. 21 submitted a suite of policy suggestions to HUD aimed at improving access to affordable housing.  The Roundtable’s comments offer specific policies intended to bring safe, decent, and affordable housing within reach of indigent and low-income households.  The comments also urge HUD to focus on the scarcity of homes accessible to middle class families, and recommends policies to increase both purchase and rental options for teachers, first responders, and other contributors in America’s workforce. (Roundtable Weekly, Jan. 17) 
 
Industry Focus
 
Walker & Dunlop’s this week published its Winter Multifamily Outlook – Focus on Affordable Housing that focuses on the economics driving the affordable housing crisis, a Q&A with Fannie-Freddie’s lead regulator Dr.  Mark Calabria; and a report on how Opportunity Zones can be paired with HUD programs to provide new affordable housing.
 
  • Affordable housing policy was also the topic of a panel discussion moderated by Walker & Dunlop Chairman & CEO Willy Walker during The Roundtable’s Jan. 28 State of the Industry Meeting in Washington.  Participants included House Financial Services Committee Ranking Member Patrick McHenry (R-NC) and Federal Housing Finance Agency Director Mark Calabria – whose agency oversees the Government Sponsored Enterprises that own or guarantee $5.6 trillion in single and multifamily mortgages.  (Roundtable Weekly, Jan. 31) 
  • In Walker and Dunlop’s previous Outlook Quarterly Report (Fall 2019) a policy Q&A with Roundtable President and CEO Jeffrey DeBoer addressed housing affordability and rent control.   DeBoer states in the interview, “Although we focus on national issues, we do have concerns about the more local trend to enact rent control. These laws are destructive. They may help those people in the short term but those same people are hurt in the long run by giving them lower and lower quality housing. It ends up being very inequitable over time and hopefully the trend will not gain additional traction.”

  • Bibby states, “A full 32.1% of multifamily development costs are driven by government regulations—fees, standards, approval requirements, impact studies. … Places with the heaviest hand of government are hurting hardworking families trying to make ends meet the most. We should streamline regulations, give people more housing options and bring costs down.” 

The national dialogue about affordable housing policy challenges and solutions, along with the evolving dynamics of the upcoming elections, will be discussed during The Roundtable’s Spring Meeting on March 31 in Washington. 

White House Releases FY 2021 Budget; Congressional Hearings Focus on Administration Policy Priorities, Including FIRPTA Repeal

Posted on by Trey Jackson

FY2021 Budget Cover x475

The Trump Administration on Monday released a $4.8 trillion budget for FY 2021 signaling policy priorities for a potential second term, followed by Senate and House committee hearings this week that focused on the proposal and tax-related issues – including FIRPTA repeal; correcting a drafting error affecting qualified improvement property (QIP); and expansion of the low-income housing tax credit.  (Administration’s 2021 budget proposal and supporting budget materials)

  • Initial budget proposals from the White House are useful only as a starting point for funding negotiations with Congress, which can produce a significantly different budget reflecting vastly different policy positions. 
  • The Administration’s FY 2021 budget proposal would also reverse a two-year deal negotiated with Congress last summer.  While the August deal raised spending limits for both defense and domestic programs, this week’s proposed budget would cut domestic spending by six percent. (The Hill, Feb. 9)
  • The proposed budget also includes the elimination of several energy tax incentives of importance to real estate, including:

* Repeal credit for residential energy efficient property placed in service after December 31, 2020.

* Repeal accelerated depreciation for renewable energy property —including solar energy, wind energy, biomass, geothermal, combined heat and power, and geothermal heat pump property; fuel cells; and micro-turbines—would range from five to 20 years. Qualifying properties would still be eligible for the bonus depreciation allowance included in the 2017 tax overhaul.

* Repeal energy investment credit for property where construction begins after December 31, 2020.

  • The White House budget, which would also devote billions to construct a border wall with Mexico and lead to a $966 billion deficit, was immediately rejected by House Speaker Nancy Pelosi (D-CA) and criticized by House Budget Committee Chairman John Yarmuth (D-KY). (Associated Press, Feb. 9)

  • Republican Senate Budget Chairman Mike Enzi (WY) also weighed in with a Feb. 10 statement.  “Presidents’ budgets are a reflection of Administration priorities, but in the end, they are just a list of suggestions, as the power of the purse rests with Congress. Bipartisan consensus will be necessary to bring our debt and deficits under control. I hope to work with my colleagues on both sides of the aisle to put our country on a more sustainable fiscal course.”

Congressional Hearings

Administration officials appeared before congressional committees this week to testify about the budget proposal and face Q&A on other policy issues.

  • Secretary of the Treasury Steven Mnuchin testified on Feb. 12 before the Senate Finance Committee, urging Congress to make the temporary provisions of the 2017 tax law permanent.

  • During Q&A, Mnuchin also expressed interest in working with Sen. Maria Cantwell (D-WA) and Senate Banking, Housing and Urban Affairs Ranking Member Sherrod Brown (D-OH) on expanding the Low Income Housing Tax Credit (LIHTC).
  • The Treasury Secretary reiterated his support for Sen. Pat Toomey’s (R-PA) bill to correct a drafting error in the 2017 tax law that unintentionally requires retailers to depreciate certain property improvements over 39 years – rather than the intended option of immediate expensing.  Correcting this qualified improvement provision (QIP) is, Mnuchin testified, “our number one request to get a congressional fix for.”  (Senate Finance Committee hearings, with video)
  • In the House, the Ways and Means Committee on Feb. 11 held a hearing on “The Disappearing Corporate Income Tax, which was preceeded by a Joint Committee on Taxation report on corporate income tax policy.
  • During Q&A, Committeee Member Kenny Marchant (R-TX), sponsor of the Invest in America Act (H.R. 2210, engaged witnesses on the importance of repealing the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA).
  • Jason Furman – an economics professor at the Harvard Kennedy School of Government and former chair of the White House Council of Economic Advisers – responded to Rep. Marchant, “I think it is certainly worth taking a serious look at repealing it … In the Obama Administration we did take a look at this and it did seem like there was some infrastructure investment that wasn’t coming in to the country as a result of it.”
  • Douglas Holtz-Eakin – a former director of the Congressional Budget Office and the sole Republican witness – told the committee, “This is a law whose time has passed.  It should be repealed.”  ( Watch video of Rep. Marchant’s FIRPTA exchange)

More congressional hearings on the budget and appropriations are scheduled after lawmakers return from next week’s congressional recess.

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House Hearing Considers Roundtable-Supported Energy Efficiency Legislation

Posted on by Trey Jackson

architecture-blue-building-business-x475

In the lead-up to the November elections, Democrats continued to draw attention this week on Capitol Hill to energy and climate issues, as the House Energy Subcommittee heard testimony on a number of bills to advance efficiency in buildings and modernize the nation’s electric grid.  (Subcommittee hearing and memorandum, Feb 12.)

  • The Subcommittee’s review included the Energy Savings and Industrial Competitiveness (ESIC) Act (H.R. 3962), long supported by The Real Estate Roundtable.  The bipartisan bill is sponsored by Representatives Peter Welch (D-VT) and David McKinley (R- WV), and is the companion to a Senate version (S. 2137) championed by Senators Rob Portman (R-OH) and Jeanne Shaheen (D-NH).  The Senate measure passed its committee in Sept. [Roundtable Weekly, Sept. 27]
  • In The Roundtable’s Feb. 11 ESIC Act support letter to House leaders, President and CEO Jeffrey DeBoer noted that,  “[t]he U.S. real estate sector has made significant strides to improve the energy efficiency and reduce the carbon footprint of America’s building infrastructure over the last decade.”  He further described how H.R. 3962 would advance the industry’s energy efficiency efforts.  (Roundtable House ESIC Act letter, Feb. 11)
  • The ESIC Act would improve the current process to develop “model” building energy codes with new “open government” provisions. Real estate and other stakeholders would be provided a platform to comment on the federal government’s influential role in the codes process, compelling the U.S. Department of Energy (DOE) to consider cost effectiveness when the agency develops efficiency recommendations for new construction and major retrofits.  DOE would also be required to assess the small business impacts of its energy code recommendations.
  • The ESIC Act would further direct the U.S. Energy Information Administration (EIA) to coordinate with the Environmental Protection Agency’s ENERGY STAR program, when EIA periodically gathers significant nationwide data related to energy consumption in U.S. buildings.
  • In addition, the ESIC Act includes innovative provisions – known as the SAVE Act – to assist home buyers with financing energy efficiency improvements as part of the residential mortgage underwriting process.
  • Among the witnesses at the Wednesday House hearing was Lowell Ungar, senior policy advisor for the American Council for an Energy-Efficient Economy (ACEE), who  testified in support of H.R. 3962.  Mr. Ungar also spoke at the recent Sustainability Policy Advisory Committee (SPAC) meeting on January 29, regarding the estimated economic and environmental benefits of an accelerated depreciation tax strategy known as “E-QUIP” to motivate “retrofit” project installations of high performance HVAC, windows, lights, and other building equipment.  The Roundtable and coalition partners continue to work toward introduction of an E-QUIP bill in the coming months.  (E-QUIP Coalition Letter, May 8, 2019).
  • The ESIC Act’s building codes provisions – allowing for consideration of financial impacts on businesses and homeowners – contrasts to a recent climate framework released by Democratic leaders.

While the parties’ respective visions on energy and climate policy are coming into sharper focus in advance of next November’s elections, prospects for passing omnibus legislation that clears both the House and Senate this year are low.

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Fannie, Freddie Regulator to Propose New Affordable Housing Rules, Takes Steps Away from LIBOR and Toward Privatization of GSEs

Posted on by Trey Jackson

Mark-Calabria-RER_8953x475

The federal regulator of Fannie Mae and Freddie Mac – the Government Sponsored Enterprises (GSEs) who own or guarantee $5.6 trillion in single and multifamily mortgages – will propose new affordable housing requirements and duty-to-serve plans this year. 

  • Federal Housing Finance Agency Director Mark Calabria, above, told Politico this week that the regulator’s Division of Research and Statistics will first study how effective the current rules have been, which expire at the end of 2020.   “I don’t know whether they’ve (the requirements) made a difference in getting anybody into a home who wouldn’t have been otherwise; I mean unless you have a strong evaluative function, how do you know whether what you’re doing makes a difference?” Calabria said.    (PoliticoPro, Feb. 10)
  • Calabria also discussed the timeline for when Fannie and Freddie will stop acquiring adjustable rate mortgages tied to the London Interbank Offered Rate (LIBOR) as loans will begin to be tied to the Secured Overnight Financing Rate (SOFR) as the global benchmark for interest rates.  FHFA’s steps away from LIBOR will include:

*  New language will be required for single-family Uniform Adjustable Rate Mortgage (ARM) instruments closed on or after June 1, 2020;  

*  All LIBOR-based single-family and multifamily ARMs must have loan application dates on or before September 30, 2020 to be eligible for acquisition; and,

*  Acquisitions of single-family and multifamily LIBOR ARMs will cease on or before December 31, 2020.

  • “These steps represent important milestones in the Enterprises’ transition away from LIBOR to a more robust reference rate.  We will continue to monitor exposure to LIBOR and ensure the Enterprises manage the risks associated with the transition in a safe and sound manner,” said Calabria.  (FHFA news release, Feb. 5)
  • FHFA also continues to take steps toward recapitalizing Fannie and Freddie before returning the GSEs to private ownership after their $190 billion government bailout in 2008.  Calabria announced on Feb. 3 that FHFA has selected Houlihan Lokey Capital, Inc. as a financial advisor to assist in the development and implementation of a roadmap to responsibly end the GSEs conservatorships. 
  • Houlihan Lokey will consider business and capital structures, market impacts and timing, and available capital raising alternatives, among other items as outlined in a previously published Statement of Work.

  • “Hiring a financial advisor is a significant milestone toward ending the conservatorships of the Enterprises,” Calabria said. “The next major milestone for FHFA is the re-proposal of the capital rule, which will happen in the near future.”  (FHFA news release, Feb. 3)
  • Director Calabria spoke during The Real Estate Roundtable’s Jan. 28, 2020 State of the Industry Meeting in Washington.  He addressed his agency’s need to responsibly privatize Fannie and Freddie while ensuring sufficient private capital is in place to protect taxpayers, along with access to affordable rental housing.

The Roundtable wrote to the leadership of the Senate Committee on Banking, Housing and Urban Affairs in September 2019 regarding reform of the nation’s house finance system.  The letter notes the Treasury Department’s constructive proposal for both legislative and administrative reforms to the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, and urges both Treasury and the FHFA to work with Congress to end conservatorship through comprehensive, bipartisan, legislative reforms.  (Roundtable GSEs comment letter, Sept. 9, 2019)

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Minneapolis Fed President Neel Kashkari Endorses More Private Sector Development to Counter Affordable Housing Crisis, Echoing Roundtable’s Policy Agenda

Posted on by Trey Jackson

Kashkari x475 JCHS event edit

The increasing cost burden of rental housing is now reaching middle-income Americans, according to a Harvard University Joint Center for Housing Studies (JCHS) report, America’s Rental Housing 2020.   Federal Reserve Bank of Minneapolis President and CEO Neel Kashkari introduced the report at a Jan. 31 event.  “We need a lot more private sector development to come in, build many, many more units across the spectrum, create more supply, that’ll make things more affordable for everyone.  Unless we unlock the private sector, we’re never going to help the vast majority of people who are struggling with affordability today,” Kashkari said.  (KSTP video, Jan. 31)

  • Kashari noted the challenge is how to encourage the private sector to create and preserve affordable housing alternatives at scale so that other targeted government programs can also do their part.  “Our research has shown, as many others have shown, that if the private sector builds more units, even market-rate units, it adds supply to a city or region that ends up creating space for everybody, Kashkari said. (YouTube video of JCHS event and ULI’s Urban Land Magazine, Feb. 5)

     

  • The latest research from Harvard shows rising rental demand and constricted supply have reduced the stock of low- and moderate-cost units.  This shift has significantly altered the profile of the typical renter household, resulting in a growing number of renters with incomes between $30,000 and $75,000 paying more than 30 percent of their income for housing – meeting the definition of “cost-burdened.” (JCHS interactive map of the U.S.).

     

  • The report also notes that the rising cost of affordable rentals has resulted in a majority of lower-income renters spending more than half of their monthly income on housing – conditions that have led to increases in homelessness, particularly in high-cost states. (Bloomberg, Jan. 31 and JCHS chart)

     

  • According to the JCHS, climate change also poses a threat to the stability of American renter households.  Between 2008 and 2018, 10.5 million of the country’s 43.7 million renter households live in zip codes that incurred at least $1 million in home and business losses due to natural disasters.  Additionally, 8.1 million renter households report that they do not have the financial resources to evacuate their homes if and when a disaster strikes.

 

  • The report’s Executive Summary concludes, “Local governments have found themselves on the front lines of the rental affordability crisis. In response, many jurisdictions have adopted a variety of promising strategies to expand the affordable supply, including increased funding and reform of zoning and land use regulations to allow higher-density construction. Organizations ranging from hospitals and universities to tech companies have also started to address the crisis. Ultimately, though, only the federal government has the scope and resources to provide housing assistance at a scale appropriate to need.” (PDF of entire JCHS report)

     

    Industry Response

     

    The Real Estate Roundtable’s recently released 2020 Policy Agenda addresses affordable housing challenges facing the nation’s communities.   The policy agenda states, “The Roundtable aims to galvanize policy makers and like-minded real estate organizations around a set of pro-housing recommendations designed to increase the dearth of affordable units across the nation. ‘One-sizefits-all’ rent control mandates and anti-eviction laws will only further distort the housing supply-and-demand curve without addressing the underlying conditions that create market shortages in the first place.”

     

  • The Roundtable recommends more enduring solutions, such as:

     

    • Federal grants could put a premium on local commitments to high-density zoning, the expansion of by-right multifamily zones, transit-oriented growth and affordable housing.

       

    • Ensure that banks receive “credit” under the Community Reinvestment Act for lending to middle class families.

       

    • Support the production of manufactured housing.

       

    • Free up under-utilized federal properties for affordable housing development.

       

    • Consider the impact of student loan debt on federally-backed mortgage qualification.

       

    • Short-term housing rentals must be regulated to combat long-term housing shortages.

       

  • The Roundtable also remains focused on legislative and regulatory action that will increase the availability of housing, like a more robust low-income housing tax credit program from Congress and a plan to reasonably reform Fannie Mae and Freddie Mac.  On Jan. 21, The Roundtable submitted a suite of policy suggestions to the Department of Housing and Urban Development (HUD) to improve access to affordable housing.  (Roundtable Weekly, Jan. 17) 

     

  • The Roundtable’s comments to HUD offer policies intended to bring more safe, decent, and affordable housing within reach of indigent and low-income households.  It also urges HUD to focus on the scarcity of homes accessible to middle class families, and recommends policies to increase both purchase and rental options for teachers, first responders, and other contributors in America’s workforce. 

 

During The Roundtable’s State of the Industry meeting last week in Washington, DC, a discussion of housing availability and affordability featured Federal Housing Finance Agency Director Mark Calabria and Rep. Patrick McHenry (R-NC), Ranking Member of the House Financial Services Committee. (Roundtable Weekly, Jan. 31)

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House Democrats Aim for 100 Percent “Clean Energy Economy” by Mid-Century; Proposal Includes Ramped-Up Building Codes

Posted on by Trey Jackson

Pallone podium Clean Future Act x375

Democratic leaders on the House Energy and Commerce (E&C) Committee released a far-reaching bill on January 28, signaling their plans for climate legislation based on the outcome of next November’s elections.  The bill includes rigorous efficiency targets for building energy codes and a framework to drive the U.S. electric grid toward net-zero carbon emissions. [E&C press release]

  • “The CLEAN Future Act,” sponsored by E&C Chairman Frank Pallone (D-NJ) — above in photo — and Subcommittee Chairmen Paul Tonko (D-NY) and Bobby Rush (D-IL), would implement a climate policy framework announced last month.  [See Roundtable Weekly, January 10]  The 622-page “discussion draft”  sets an overall target for a “100 percent clean energy economy” by 2050. 

  • The draft proposes a number of de-carbonization and renewable energy mandates and incentives affecting the real estate, power generation, transportation, and manufacturing sectors of the U.S. economy.  [CLEAN Future Act section-by-section analysis]
  • Commercial and residential buildings would be subject to increasingly stringent “model” energy codes for new construction and major retrofit projects.  States and localities typically adopt these model codes into law, but they have authority to alter them.
  • The CLEAN Future Act would require codes to reach a target for buildings to save 50 percent more energy by 2030 (relative to a 2016 baseline).  The bill’s 50-percent-improvement target would not consider the expenses incurred by owners and developers to install more costly – but efficient – HVAC, windows, lighting, and other equipment in their assets.  In contrast, a competing bipartisan proposal pending in the House and Senate — known as the Energy Savings and Industrial Competitiveness (ESIC) Act — would evaluate cost effectiveness and small business impacts as iterations of energy codes are developed.  

  •  The Roundtable has long-supported the ESIC Act, sponsored by Senators Rob Portman (R-OH) and Jeanne Shaheen (D-NH), and Representatives Peter Welch (D-VT) and David McKinley (R-WV).   [Roundtable Weekly, Sept. 27, 2019].

  • While the CLEAN Future Act’s building-related provisions emphasize increasingly stringent energy codes, it does not impose energy consumption, carbon reduction, or “labeling” mandates on building owners that have gained traction at the state and local levels.  [E.g., Roundtable Weekly, April 19, 2019].  Nor does the bill propose a “tax on carbon” as a means to cut greenhouse gas emissions.
  • Other notable elements of the CLEAN Future Act include: 
  • Creation of a market to buy and sell “clean energy certificates,” to drive more renewable energy to the U.S. electric grid and render the electricity sector “net-zero” carbon emissions by 2050;
     
  • New federal loan and other incentive programs to help finance microgrids and “distributed energy” projects, which would trigger Davis-Bacon prevailing wage requirements;  
     
  • Mandate connection of renewable energy facilities to the electric grid, and eliminate any monopolies in the U.S. where public utilities control all levels of production, transmission, and sale of power in wholesale electricity markets; and
     
  • Projects supported with federal funds must “buy clean” construction materials and products that generate lower greenhouse gas emissions during their manufacture. 

In addition to the CLEAN Future Act, the House’s Select Committee on the Climate Crisis is expected to release its own principles for legislation by the end of March. [Roundtable Weekly, Nov. 22, 2019]. 

Prospects to advance the CLEAN Future Act through Congress this year are virtually zero, as the bill does not presently align with Republican priorities in the Senate.  Nonetheless, as Democrats are soliciting input on their climate framework, The Real Estate Roundtable’s Sustainability Policy Advisory Committee (SPAC) has convened a “task force” process to review the omnibus package and provide comments to the bill’s House majority sponsors.

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National Multifamily Housing Council President Doug Bibby Announces 2021 Departure

Posted on by Trey Jackson

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National Multifamily Housing Council (NMHC) President Doug Bibby – an industry leader for nearly two decades who has played a major role in advancing real estate’s policy agenda in Washington, DC – announced on Jan. 29 that he will depart the organization in 2021. 

  • “It has been, and continues to be, a great honor and privilege to serve in this position,” said Bibby. “Representing the apartment industry has been one of the most fulfilling and gratifying experiences of my career. I am proud of the work the team at NMHC has done and the strides the industry has taken during my tenure,” he added.  (NMHC’s bio on Doug Bibby)
  • Roundtable President and CEO Jeffrey DeBoer noted, “Among the 18 national real estate trade associations that The Real Estate Roundtable works with on common issues of importance to commercial real estate, NMHC is one that has shown outstanding leadership on important policies such as housing affordability, regulatory reform and the recent reauthorization of the Terrorism Risk Insurance Act.  Doug Bibby has played an essential and exemplary role in his large organization’s successes on the policy front since June 2001.  He deserves the thanks of the entire industry and we wish him well as he prepares for his next endeavor.”

NMHC’s officers have engaged an executive search firm, Russell Reynolds Associates, and hope to introduce Bibby’s successor at its January 2021 Annual Meeting.

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