News Type: Roundtable Weekly

Building Success” Reports on The Roundtable’s FY2018 Policy Activities in Tax, Capital and Credit, Homeland Security, Energy and Infrastructure Issue Areas

Posted on by Trey Jackson

The Real Estate Roundtable has released its FY2018 Annual Report “Building Success,” which reports on the organization’s policy activities from July 1, 2017 to June 30, 2018 and outlines its policy priorities for the coming year.

Roundtable President and CEO Jeffrey D. DeBoer showcasing The Roundtable’s 2018 Annual Report “Building Success.”

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  • “We are extremely proud of our success this past year and equally eager to build on its foundation as we move into our new fiscal year. As always, we will continue to inform lawmakers with consistent and credible policy analysis that encourages economic growth, job creation, and a healthy national real estate market,” said Roundtable President and CEO Jeffrey D. DeBoer.
  • Immediate Past Roundtable Chair (2015-2018) William C. Rudin (Co-Chairman and CEO, Rudin Management Company, Inc.) noted the continued efforts of promoting greater diversity throughout the organization and his efforts during his tenure as Chair. “We have made measurable progress at identifying and recruiting more highly qualified women and people of color to join, and participate at The Roundtable. With greater membership diversity, we ensure that our decisions are better informed and more sustainable.”

The Report includes summaries showing continued progress on the policy front, including:

  • In late 2017, the most comprehensive tax reform in over 30 years, the Tax Cuts and Jobs Act, was signed into law.  Due in large part to the Roundtable’s advocacy efforts, TCJA preserved interest deductibility; retained like-kind exchanges for real estate; and maintained depreciation and cost recovery rules. The Roundtable and its Tax Policy Advisory Committee is continuing its efforts with Treasury and the Administration to ensure appropriate implementation of the comprehensive law.

    The Real Estate Roundtable’s FY2018 Annual Report “Building Success” reports on the organization’s policy activities from July 1, 2017 to June 30, 2018 and outlines its policy priorities for the coming year.

  • Congress passed financial deregulation legislation – Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) – that included important reforms to the Basel III High Volatility Commercial Real Estate (HVCRE), which promote sustainable development and lending, and lowers financial barriers for job-creating projects.
  • The Federal Reserve and four other federal agencies approved a proposal to simplify and ease the Volcker Rule.  The proposal, known as Volcker 2.0, seeks to simplify regulatory requirements by giving banks new quantitative “bright-line rules” to provide more clarity on what activities are prohibited and permitted.
  • As a long-time supporter of the ENERGY STAR Program, The Roundtable was a key player in the creation and ongoing development of the EPA’s new charter tenant program “ENERGY STAR for Tenants” labeling platform of high-performance leased office spaces.
  • Anticipating infrastructure as a policy issue for possible compromise after the upcoming midterm elections, The Roundtable offered comments to the Administration and Congressional committees on real estate’s role in creating public-private partnerships to help repair the roads, transit, broadband, power grid and other systems needed to make our communities safe, productive and competitive.

Newly elected Roundtable Chair Debra A. Cafaro (Chairman and Chief Executive Officer, Ventas, Inc.) emphasized that The Roundtable’s policy agenda remains full of key issues that require our engagement as a non-partisan industry voice. “Above all, we must uphold our independent and respected position on Capitol Hill, emphasizing our optimism about the economy and the positive contributions the real estate industry provides as a job creator and as a cornerstone for retirement savings. We are committed to proactively advancing policies that promote a healthy balance of capital and people flows to create sustainable economic growth that is good for our members, our industry and our national economy,” said Cafaro.

The publication includes a listing of all Roundtable members, as well as the FY2019 Board of Directors and Committee Leadership, and has been mailed to all Roundtable members, congressional offices on Capitol Hill, and is available online.

California’s Governor Signs Rent Control Law Amid Growing List of Jurisdictions Seeking to Address Housing Affordability

Posted on by Trey Jackson

California Governor Gavin Newsom (D) on October 9 signed into law a statewide rent cap of 5 percent plus inflation, along with enhanced tenant eviction protections.  California is now the third state in the nation – amid a growing list of other jurisdictions – to enact rent control laws in an attempt to address housing affordability problems.  (LA Times and Gov. Newsom website, Oct. 9 and Roundtable Weekly, June 21)

  • California’s law (AB 1482) is set to expire in 10 years – unlike New York, which permanently increased New York City rent control measures in June, while allowing other areas in the state to implement the policy.  In Oregon, a permanent statewide rent cap of 7 percent plus inflation was enacted in March. (Axios, Oct. 9 and NMHC interactive national map)
  • In a state of nearly 40 million people, California’s rent control measure could affect an estimated 8 million residents of rental homes and apartments. (Realtor Magazine, Sept. 12).  The 5% rent increase cap would not apply to housing built within the last 15 years or to single-family homes that are not corporate-owned.  (LA Times, Oct 8 and Curbed Los Angeles, Oct 10)
  • Gov. Newsom signed 18 other bills this week to address California’s housing affordability crisis, including measures to encourage construction of accessory dwelling units (ADUs), which encompass the renovation of existing garages into affordable housing. (KABC-TV, Oct. 10 and Newsom website, Oct. 9)
  • An interactive national map by the National Multi Housing Council (NMHC) details the trend in how various state capitals are attempting to address affordable housing through rent control measures. 
  • The rent control movement is partially influenced by a loose network of local activist groups that continue to organize successful efforts in some of the nation’s largest cities and states, according to an Oct. 3 article in The Real Deal.
  • “Although they are well-intended, we know from decades of experience that rent control regulations distort markets, create shortages, and depress business investments.  They often harm the communities they seek to help,” said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. “Policy makers should avoid rent control measures and rather seek solutions that grow America’s residential stock, to enable our communities to provide safe and decent housing for low-income families and the teachers and first-responders in our workforce.”
  • Housing affordability has emerged as a policy focus in this presidential campaign cycle.  The housing and real estate-related campaign platforms of the 12 candidates who will participate in the Oct. 15 Democratic primary are profiled by Bisnow this week.  (“Here’s Where All The Democratic Presidential Candidates Stand On Housing,” Oct. 8)

In June, the White House established a Council on Eliminating Regulatory Barriers to Affordable Housing, chaired by Housing and Urban Development (HUD) Secretary Ben Carson. (White House Executive Order, June 25).  The council includes members from across eight federal agencies who will analyze how federal, state, and local regulations impact the costs of developing affordable housing and the economy.  It will also recommend ways to reduce regulatory burdens at all levels of government that hinder affordable housing development. (White House Fact Sheet, June 25)

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Treasury Unveils Proposed Regulations to Resolve Tax Questions Related to LIBOR Cessation

Posted on by Trey Jackson

The Treasury Department on Monday released proposed regulations to clarify the tax consequences of replacing the expiring London Inter-bank Offered Rate (LIBOR) in existing financial contracts, including real estate loans. The proposed rules largely align with Roundtable recommendations submitted over the summer. (Roundtable LIBOR letter, June 6 and Roundtable Weekly, June 7)

  • LIBOR is used as a reference rate in an estimated $200 trillion of financial contracts, including $1.3 trillion of commercial real estate loans.  In response to concerns regarding manipulation of LIBOR, UK financial authorities are phasing it out; LIBOR is expected to cease operation as working interest rate index by 2021. 
  • The replacement of LIBOR in existing agreements presents important tax questions.  “If the terms of a debt instrument are significantly modified, for Federal income tax purposes there is a deemed exchange of the old debt for a new (modified) debt instrument,” wrote Roundtable President and CEO Jeffrey DeBoer in the organization’s June 6 comment letter. 
  • Without relief, this deemed exchange could trigger the recognition of taxable gain or loss for the lender, or debt discharge income for the borrower.  “Moreover, the tax consequences of the deemed exchange can arise without generating actual cash to pay any ensuing tax liability,” continued DeBoer.  
  • As The Roundtable had recommended, the Treasury’s proposed regulations give borrowers and lenders the flexibility they need to replace LIBOR with virtually any other index that reflects objective changes in the cost of borrowing money – such as a broad index of Treasury or corporate borrowing rates – in addition to a list of rates suggested by various regulators. 
  • Don Susswein (RSM), a member of the Roundtable’s Tax Policy Advisory Committee (TPAC) and one of the architects of The Roundtable’s comments, noted, “The key to the flexibility is a reasonable safeguard to ensure that the parties are acting in good faith primarily to preserve their original deal—not modifying it to compensate for changed circumstances.”
  • As a safeguard to prevent potential abuse, the proposed regulations require that the fair market value of the modified instrument be “substantially equivalent” to its value before modification.  
  • Another key TPAC member, Joe Forte (Sullivan & Worcester) said, “It is clear that the hesitation of many market participants to transition from LIBOR to SOFR has been uncertainty concerning the tax and accounting treatment of the rate modification. Following on FASB’s Exposure draft on reference rate reform last month, the new Treasury/IRS guidance addressing the tax consequences of rate modification of cash contracts and derivatives has proposed two safe harbors similar to those The Roundtable proposed.”
  • “The Treasury and IRS deserve high marks for proposing a sound, rational framework early in the LIBOR transition to address with these challenging issues and remove tax uncertainty,” said DeBoer.  

Comments on the proposed rules are due by November 25, 2019.  Taxpayers may rely immediately on the proposed rules when evaluating the tax consequences of an alteration of the terms of a loan or other contract, provided the taxpayer consistently applies the rules. 

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Treasury Issues Final Regulations Modifying Rules for Allocating Real Estate Debt Among Partners

Posted on by Trey Jackson

Final regulations released by the Treasury Department last Friday and effective October 9 provide new tax guidance on the allocation of liabilities between partners in a real estate partnership.  The new rules bring to a conclusion a regulatory project that started over six years ago.

  • How real estate debt and other liabilities are allocated among partners when property is contributed to a partnership carry important tax consequences.  Allocation rules can determine whether built-in gain is recognized or deferred at the time of the contribution.  The rules also affect whether a partner obtains sufficient tax basis to deduct future losses.  Generally, a partner receives full basis for partnership debt if the debt is recourse and the partner is obligated to pay off the loan in the event the partnership defaults.
  • The new regulations will likely complicate taxpayers’ ability to achieve a preferred allocation of real estate liabilities (and deductions) through the use of liability guarantees such as “bottom guarantees,” capital account deficit restoration obligations, and other payment or reimbursement arrangements. 
  • A bottom guarantee is a guarantee of the last dollars of a liability.  The lender may pursue the guarantor only if the lender is unable to collect at least the guaranteed amount of the loan from the borrower.  The final rules will largely restrict the use of bottom guarantees.  Treasury expressed concerns that bottom guarantees lack a non-tax commercial purpose, are “structured to insulate the obligor from having to pay,” and do not represent a real economic risk of loss.
  • On four separate occasions, The Roundtable submitted comments on the partnership liability regulatory project, which began in 2013. Additionally, a working group from The Roundtable’s Tax Policy Advisory Committee (TPAC) previously met with Treasury and IRS officials.  The Roundtable had concerns that changes would disrupt longstanding partnership tax rules and increase the tax liability of previously untaxed real estate reorganization transactions.  [Roundtable Comment Letters: March 13, 2013 and April 7, 2017  and August 7, 2017 ] 
  • Input from The Roundtable, TPAC members and other stakeholders contributed to several revisions to the proposed rules over the last five years.  The rules published in the Federal Register on October 9 finalize temporary regulations under section 752 that were released in 2016 and scheduled to expire this month.  Those 2016 regulations were revised versions of the rules initially proposed in 2014.  The October 9 rules also finalize proposed regulations issued in June 2018 that walked back 2016 proposed regulations with respect to the allocation of debt in “disguised sales” transactions under section 707. 
  • The preamble to the final rules notes that Treasury continues to consider the appropriate treatment of “exculpatory liabilities” that are recourse to an entity under state law, but where no partner bears the economic risk of loss.

The final regulations provide critical transition relief.  The rules generally apply to liabilities incurred or assumed by a partnership, and to payment obligations imposed or undertaken with respect to a partnership liability, on or after October 9, 2019.  The new restrictions do not apply if the liability was incurred or assumed by a partnership, or the payment obligation was imposed or undertaken, pursuant to a written binding contract in effect prior to October 9.

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Draft Legislation to Reauthorize TRIA 10 Years Circulated by House Financial Services Committee

Posted on by Trey Jackson
Modern tower buildings or skyscrapers in financial district with cloud on sunny day in Chicago, USA. Construction industry, business enterprise organization, or communication technology concept

A draft bill to reauthorize the Terrorism Risk Insurance Act (TRIA) for 10 years is expected to be the focus of next week’s House Financial Services Committee hearing “Protecting America: The Reauthorization of the Terrorism Risk Insurance Program.”

A committee memo distributed this week notes that Committee Chairwoman Maxine Waters (D-CA) will introduce the draft reauthorization bill. 

The Oct. 16 hearing will be webcast live here.

  • According to background provided by the Financial Services Committee memorandum, following the September 11, 2001 terrorist attacks, “Analysts warned that the disappearance of affordable terrorism risk coverage would negatively affect the larger U.S. economy due to the importance of commercial insurance in a variety of business transactions.”  
  • In response, Congress passed the Terrorism Risk Insurance Act of 2002 (TRIA), which established the first federal backstop for terrorism risk insurance. Specifically, TRIA established the Terrorism Risk Insurance Program (TRIP) within the Department of Treasury to provide federal reinsurance in the event of catastrophic losses.
  • TRIA was extended in 2005, 2007 and again in 2015 – following a 12-day lapse when Congress failed to complete their work on reauthorization at the end of 2014.
  • With TRIA currently set to expire at the end of 2020, a long-term, clean reauthorization is a top priority for The Real Estate Roundtable.  TRIA was a key topic of discussion last week during meetings of The Roundtable’s Homeland Security Task Force and Real Estate Capital Policy Advisory Committee in New York City. 
  • During an October 1 podcast episode of “Through The Noise,” Roundtable President and CEO Jeffrey DeBoer noted, “Businesses and facilities of all types need to see the terrorism risk insurance program extended. This need applies to hospitals, all commercial real estate buildings, educational facilities, sports facilities, NASCAR and theme parks, and really any place where commercial facilities host large numbers of people.”
  • The Roundtable and nearly 350 companies and organizations urged Congress on Sept. 17 to swiftly pass a long-term TRIA reauthorization. (Roundtable Weekly, Sept. 20)
  • A 2018 Treasury Department report noted that 78 percent of all TRIA-eligible policies included terrorism risk insurance coverage. Treasury data also showed that the take-up rate for terrorism risk insurance did not vary significantly by region (74 percent in the Northeast, 82 percent in the Midwest, 76 percent in the South, and 82 percent in the West). 
  • Treasury concluded that TRIP has been effective in making terrorism risk insurance available and affordable in the insurance marketplace.  (Treasury, Report on the Effectiveness of the Terrorism Risk Insurance Program, June 2018)
  • Additionally, Financial Services Committee Member Carolyn Maloney (D-NY) hosted an Oct. 8 roundtable discussion on TRIA reauthorization in New York City with Reps. Nydia Velazquez (D-NY), Gregory Meeks (D-NY) and industry stakeholders.
  • Rep. Maloney stated, “The magnitude and importance of the Terrorism Risk Insurance Act cannot be overstated. TRIA provides critical government backup to private insurers in the event of a terrorist attack and is especially vital to the economy of New York City. This morning I hosted a roundtable meeting alongside my colleagues in Congress and industry stakeholders to discuss how TRIA is working now, whether there should be any changes made to this legislation before reauthorization, and when Congress needs to act.”

She added, “What we learned today is that all the stakeholders agree that Congress should pass a clean, long-term reauthorization of this critically important legislation — without delay. The Terrorism Risk Insurance Act is one of the most important issues before Congress and it must be renewed with no disruption to coverage and no lapse in renewal.”  (Rep. Maloney news release, Oct. 8 and Twitter photo)

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ULI Releases “Emerging Trends in Real Estate 2020”; Podcast Features Roundtable’s DeBoer on Industry Issues

Posted on by Trey Jackson

The publication Emerging Trends in Real Estate 2020, released by the Urban Land Institute (ULI) and PwC, reports that U.S. real estate remains a favored asset class, as economic uncertainty and societal changes have resulted in successful industry adaptations to space design, development and business operations.   

 

  • “Throughout this period of extended economic growth, real estate development has been dominated by creative mixed-use projects that have revived many urban areas,” said ULI Global Chairman W. Edward Walter. “Going forward, those who continue to innovate with spaces that can be easily be repurposed as cities evolve will have a competitive edge.  Staying ahead of change means being flexible and adaptable.” (ULI news release, Sept. 19)
  • Trends highlighted in the report include: 
    • ESG – There is a growing commitment to the tenets of ESG (environmental, social and governance) principles among corporations in general and real estate in particular. Sustainability evaluation is becoming a checklist item for institutional investors domestically and worldwide. Strong interest by millennials in environmentally and socially conscious business practices is a major factor driving this trend.
    • Infrastructure – Real estate professionals waiting for a federal solution to America’s infrastructure needs are looking to states and localities that are committed to improved infrastructure as a foundation for economic growth.
    • Housing Affordability has reached a crucial point, even in markets that previously boasted of low-cost housing.  There is a rise in co-living arrangements, among older as well as younger generations.
    • Hipsturbia – The live-work-play districts that spurred 24-hour downtowns in the 1990s has spread to many suburban communities, which are seeking to become hip destinations, or “hipsturbs.”  The key to success: transit access, walkability, and abundant retail, restaurant and recreation options.
    • Technology – Property managers are turning to technology solutions for productivity enhancements and improved operational efficiency.  Demand is also increasing from occupants and capital sources for technological sophistication across all sectors.
  • The report also notes that the industrial/distribution sector continues to be ranked highest for investment and development prospects, reflecting the impact of e-commerce and rising demand for storage and delivery facilities.  Multifamily and single-family housing are also highly favored, as housing needs continue to change for millennials and baby boomers. 
  • Societal trends and public policy issues affecting commercial real estate are also featured in an Oct. 1 interview with Roundtable President and CEO Jeffrey DeBoer (left in photo above)  during an episode of the podcast, “Through The Noise.”  
  • In a wide-ranging, 50-minute interview, DeBoer explains The Roundtable’s role in industry efforts in Washington, including terrorism insurance, affordable housing needs, energy efficiency and opportunity zones. 
  • DeBoer states in the podcast, ““Whether rural or urban; multifamily or office … we’re working together as an industry and talking about how development projects contribute to jobs and local communities.  Commercial real estate provides 70% of local budgets to pay teachers and build roads. Healthy, strong real estate is good for everyone and helps every part of our society.”

Public policies affecting CRE will be discussed during The Roundtable’s Fall Meeting on Oct. 30 in Washington, where guests will include U.S. Housing and Urban Development (HUD) Secretary Ben Carson.

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The Roundtable and Trade Associations Urge Congress to Pass Transportation Reauthorization before Sept. 2020 Expiration

Posted on by Trey Jackson

 

HIghway Infrastructure Houston

The Real Estate Roundtable and more than 150 national trade associations urged Congress this week to reauthorize the Highway Trust Fund – the nation’s primary source for road and mass transit funds – ahead of its September 30, 2020 expiration.  (Coalition letter, Sept. 30)

  • The coalition, led by the National Association of Manufacturers and the Associated General Contractors, wrote to Senate Majority Leader Mitch McConnell (R-KY) and Senate Minority Leader Chuck Schumer (D-NY) on Monday supporting a long-term, robustly-funded surface transportation reauthorization bill.  (NAM news release, Sept. 30)
  • The Infrastructure Working Group’s letter notes the unanimous passage in July of S. 2302, America’s Transportation Infrastructure Act of 2019, by the Senate Environment and Public Works (EPW) Committee.  S. 2302 would authorize $287 billion over five years to repair and maintain the nation’s surface transportation.  (Roundtable Weekly, Aug. 2)
  • EPW’s bipartisan approval of S. 2302 may provide momentum for the full Senate to consider a package that addresses recommendations in the coalition’s letter, including:
    • Significantly increasing direct federal investments in infrastructure;
    • Fixing chronic challenges and recurring shortages in key federal infrastructure accounts such as the Highway Trust Fund;
    • Complementing and strengthening financing tools, such as municipal bonds, that successfully deliver infrastructure investments at the federal, state and local levels;
    • ‘Facilitating opportunities for private investment in U.S. infrastructure; and
    • Creating efficiencies in the federal permitting process, while continuing to provide environmental protections.
  • In related news, last week the Senate Appropriations Committee advanced a bill (31-0) to allocate federal dollars to fund the agencies responsible for transportation, housing assistance, and community development.  (Appropriations Committee news release, Sept. 19).  The spending bill – covering federal FY 2020, which started on Oct. 1 – supports the Gateway Program, a proposed $30 billion modernization of Amtrak’s Northeast Corridor connecting New Jersey and New York City.  Gateway would double rail capacity for the biggest train traffic bottleneck on the East Coast. (Senate Appropriations Markup, Sept. 26, and BGov, Sept. 24)

The Roundtable continues to provide infrastructure policy recommendations to Congress.  (Roundtable Weekly, May 3, 2019, and March 22, 2019).  Additionally, Roundtable President and CEO Jeffrey D. DeBoer discussed the role of public-private partnerships in modernizing the nation’s infrastructure on CNBC’s Squawk Box in June 2017.

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Trump Administration Allows Fannie, Freddie to Retain Earnings in Move Toward Privatization

Posted on by Trey Jackson

Fanne Mae and Freddie Mac logos

The Trump Administration took a key step on Sept. 30 to release Fannie Mae and Freddie Mac from conservatorship by allowing them to retain a total of $45 billion in earnings annually. (Wall Street Journal, Sept. 30)

  • Fannie and Freddie received $191 billion in government support during the financial crisis, but since entering conservatorship Sept. 6, 2008, they have paid the Treasury $292 billion in dividends, according to research from Keefe, Bruyette & Woods. (Reuters, March 27)
  • Under their modified governing agreements, Fannie Mae will now be allowed to retain $25 billion and Freddie Mac $20 billion annually (Bloomberg, Sept. 30)
  • The Treasury Department and Federal Housing Finance Agency (FHFA) jointly announced the modifications to the Government-Sponsored Enterprises’ (GSEs) Preferred Stock Purchase Agreements (PSPAs) – designed in the wake of the financial crisis to ensure Fannie and Freddie maintain positive net worth, meet outstanding obligations and continue providing liquidity to the multi-trillion dollar mortgage market.  (Fannie Mae Capital Agreement and Freddie Mac Capital Agreement)
  • “These modifications are an important step toward implementing Treasury’s recommended reforms that will define a limited role for the Federal Government in the housing finance system and protect taxpayers against future bailouts,” said U.S. Treasury Secretary Steven T. Mnuchin. (Treasury news release, Sept. 30)
  • FHFA Director Mark Calabria – Fannie and Freddie’s chief regulator – stated, “FHFA commits to working with Treasury in the coming months to amend the share agreements and further advance broader housing finance reform. These reform goals include limiting the government’s role in housing finance, increasing marketplace competition, focusing on affordable housing, and sustainable homeownership. The status quo is not an option. Now is the time to act.”
  • The Washington Post reported on Oct. 2 that Fannie, Freddie, and the Federal Housing Administration guarantee 33 percent more debt than before the housing crisis,  more than at any other point in U.S. history.
  • In Congress, Senate Banking Committee Chairman Mike Crapo (R-ID) on Feb. 1 released an outline for reforming the nation’s housing finance system, including the GSEs (Crapo Statement and Housing Reform Outline, Feb. 1).  At the end of March, Crapo’s committee held two days of hearings on reforming the multi-trillion dollar housing finance markets.  (Roundtable Weekly, March 29)

The Real Estate Roundtable and 27 industry organizations on March 1 submitted principles for reforming the GSEs.  The letter emphasized that compelling evidence must show the private market is capable of an expanded role before efforts are made to reduce the GSEs’ current housing finance footprint. “Ultimately, we believe any reform, be it administrative or legislative, must seek to further two key objectives: 1) preserving what works in the current system, while 2) maintaining stability by avoiding unintended adverse consequences for borrowers, lenders, investors, or taxpayers.”  (Roundtable Weekly, March 1)

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House Hearing on TRIA Reauthorization Announced for Oct. 16

Posted on by Trey Jackson

House Financial Services Committee Chairwoman Maxine Waters (D-CA)

House Financial Services Committee Chairwoman Maxine Waters (D-CA), above,  yesterday announced an Oct. 16 subcommittee hearing that will focus on “Protecting America: The Reauthorization of the Terrorism Risk Insurance Program.”  (Committee news release, Oct. 3)

  • Additionally, Financial Services Committee Member Carolyn Maloney (D-NY) will host a roundtable discussion on the reauthorization of the Terrorism Risk Insurance Act (TRIA) on Oct. 8 in New York City.
  • With TRIA currently set to expire at the end of 2020, a long-term, clean reauthorization is a top priority for The Real Estate Roundtable.  Yesterday, TRIA was a key topic of discussion during meetings of The Roundtable’s Homeland Security Task Force and Real Estate Capital Policy Advisory Committee in New York City. 
  • TRIA was originally enacted in 2002 in response to the inability of insurance markets to predict, price and offer terrorism risk coverage to commercial policyholders.  The law was extended in 2005, 2007 and again in 2015 – following a 12-day lapse when Congress failed to complete their work on reauthorization at the end of 2014.
  • The Roundtable and nearly 350 companies and organizations urged Congress last week to swiftly pass a long-term TRIA reauthorization. (Roundtable Weekly, Sept. 20)
  • The Sept. 17 coalition letter notes, “The American business community remembers all too well the twelve-day lapse in the program in early 2015 and the disruption that lapse played in a variety of markets.  We urge Congress to help provide much needed certainty by passing a long-term reauthorization of this important program without delay.”
  • Absent TRIA, there is not sufficient insurance and reinsurance capital available to provide comprehensive terrorism coverage to U.S. insurance buyers,” the coalition states.  (Reinsurance News, Sept. 17)
  • A 2019 Marsh study shows the highest “take-up” rates for terrorism risk insurance are in the education, media, financial institutions, real estate, hospitality and gaming, and health care sectors – all above 70%.

During an October 1 podcast episode of “Through The Noise,” Roundtable President and CEO Jeffrey DeBoer noted, “Businesses and facilities of all types need to see the terrorism risk insurance program extended. This need applies to hospitals, all commercial real estate buildings, educational facilities, sports facilities, NASCAR and theme parks, and really any place where commercial facilities host large numbers of people.”

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Congress Passes Government Funding Through November 21; President Trump Expected to Sign

Posted on by Trey Jackson

U.S. Capitol

A “Continuing Resolution” (CR) to fund the government at current levels through November 21 was approved by the Senate yesterday after House passage last week, sending the stopgap measure to President Trump for his signature. 

  • A senior White House official said President Trump will sign the CR, which avoids the threat of a government shutdown on October 1, the start of the government’s fiscal year.  The measure includes funding for programs of importance to commercial real estate, including the EB-5 Immigrant Investor Regional Center Program and National Flood Insurance Program.  (BGov, Sept. 26 and Roll Call, Sept. 23)

  • The CR gives lawmakers more time to negotiate spending levels and policy differences, since none of the 12 annual discretionary spending bills have been signed into law yet.  One of the most contentious issues in the appropriations process is funding for a wall on the southern border, which is overseen by the Department of Homeland Security.  Disagreements over wall funding led to the historic 35-day partial government shutdown in 2018–2019. (Politico, Jan. 25)

  • President Trump’s request for $5 billion for a southern border wall resulted in Democrats proposing an amendment in the Senate Appropriations Committee on Thursday to block the funds.  (Washington Post, Sept. 26)

  • Senate Appropriations Chairman Richard C. Shelby (R-AL) said, “As we close out this month, I think, we must acknowledge the progress we have made while also recognizing that we still have a long way to go in fulfilling our duty to fund the government.  Most importantly for those negotiations to end in success … my Democratic colleagues and the president will have to reach an agreement, once again, on border security.”

  • The appropriations dispute exists despite an agreement over the summer between Congress and the administration on a broad deal that allocated more than $2.7 trillion in discretionary federal spending over two years and suspended the debt ceiling until July 2021.  (Roundtable Weekly, Aug. 2)

Congress will return from a two-week recess on Oct. 15 to face the Nov. 21 funding deadline, or the prospect of another partial government shutdown.   The tight timeframe poses the possibility of more stopgap measures if differences over funding levels cannot be resolved.  Another scenario is the prospect of a full-year CR.  (CQ and Politico, Sept. 26)

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