Looming Debt Limit Expiration Dominates Congressional Agenda
OPM Ends “Maximum Telework” Status for Federal Government
Energy Department Releases Latest Nationwide Data on Building Energy Use
Federal Appeals Court Strikes Local Natural Gas Ban on New Construction
Roundtable Weekly
April 21, 2023
Looming Debt Limit Expiration Dominates Congressional Agenda
U.S. Capitol at dusk

House Republicans this week proposed the Limit, Save, Grow Act to cut federal spending and spur negotiations to raise the nation’s $31.4 trillion debt ceiling for approximately one year. President Joe Biden and Senate Democrats oppose the bill and propose lifting the debt ceiling without conditions. (The Hill, April 19 and Committee for a Responsible Federal Budget, April 20) 

X Date Approaches 

  • House Speaker Kevin McCarthy (R-CA) stated he aims to schedule a vote next week on the bill and begin negotiations with Democrats over raising the debt limit. McCarthy needs approval from 218 House members to pass the legislation, meaning he can only afford to lose four votes from his conference to pass it without Democratic support. (NBC News, April 19 and CBS News, April 18)

  • On Wednesday, the Problem Solvers Caucus—comprised of 32 moderate Democrats and 31 Republicans in the House—proposed their own plan to raise the debt ceiling. (Caucus news release and Axios, April 19)

  • The nonpartisan Congressional Budget Office estimated that Treasury will run out of money sometime between July and September, a point referred to as the “X date” (CBO analysis, Feb. | ABC News, April 15)

  • Mark Zandi, the chief economist at Moody's Analytics testified last month before Congress that if no resolution is reached before mid-August, “a default would be a catastrophic blow to the already-fragile economy.” (Zandi’s written testimony, March 7) 

Congressional Hearings 

SEC Chairman Gary Gensler
  • A House Ways and Means Committee hearing on Wednesday focused on the Limit, Save, Grow Act’s proposal to strike the package of clean energy tax incentives that Democrats passed last year in their signature climate law, the Inflation Reduction Act (IRA). (Roundtable Weekly, Aug. 12, 2022) 

  • The Republicans’ proposed repeal is unlikely to pass the Senate’s Democratic majority and President Biden has stated he would veto if it ever reached his desk. A Joint Committee on Taxation (JCT) report summarized the IRA’s incentives—and The Roundtable has prepared fact sheets on the credits and deductions relevant to CRE.

  • The day before the hearing, Rep. Bill Pascrell (D-NJ), Ranking Member of the Ways and Means Subcommittee on Oversight, introduced the Ending Wall Street Tax Giveaway Act, which would eliminate the current tax treatment of carried interest. (Pascrell news release, April 18)
  • On Tuesday, a House Financial Services Committee hearing on “Oversight of the Securities and Exchange Commission” featured testimony from SEC Chairman Gary Gensler, above. A final SEC rule on climate reporting, which derives from a proposal for sweeping disclosures on Scope 3 GHG emissions, is anticipated this spring. (Roundtable Weekly, March 25, 2022 and Roundtable Comments on the SEC Proposal, June 10, 2022)

  • Gensler testified that the agency is not interested in capturing emissions from all sources and small businesses in a reporting company’s Scope 3 “value chain.” He stated, “We only oversee seven or eight thousand public companies … It is not a rule about the rest.” 

The importance of the nation’s supply chains to the economy was also addressed when Commerce Secretary Gina Raimondo testified before a House appropriations panel this week on the department's 2024 budget. Secretary Raimondo will discuss national economic conditions during The Roundtable’s Spring Meeting next week in Washington. (Roundtable-level members only

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OPM Ends “Maximum Telework” Status for Federal Government
U.S. Office of Personnel Management logo

On Tuesday, the White House Office of Personnel Management (OPM) announced that it is ending its “maximum telework” directive to federal agencies. 

Federal Workforce and Telework

  • At the outset of the pandemic, OPM issued a government-wide announcement that federal agencies should "operate as 'open with maximum telework flexibilities to all current telework eligible employees…'" The April 18 memo from OPM Director Kiran Ahuja states that OPM will withdraw its maximum telework directive effective May 15, 2023. (Gov’t. Executive, Apr 19)

  • “COVID-19 is not driving decisions regarding how Federal agencies work and serve the public as it was at the outset of the pandemic,” wrote Director Ahuja in his memo to the chief human capital officers of federal agencies.

  • The announcement by OPM comes on the heels of guidance released last week from the White House Office of Management and Budget (OMB) informing federal agencies that they have 30 days to develop plans to "substantially increase" their employees in-person work at headquarters.

Roundtable Letters Jeff DeBoer RER Meeting

  • Both the OMB and OPM actions followed appeals from The Real Estate Roundtable for the federal government to end its “active encouragement of remote working for federal employees.” (RER letter to the Senate).

  • “The executive branch’s current policies are undermining the health of cities, local tax bases, and small businesses. Federal agencies should return to their pre-pandemic workplace practices,” wrote Real Estate Roundtable President and CEO Jeffrey DeBoer, above, in an April 12 letter to all U.S. Senators. 

  • In a similar letter to President Biden in December, DeBoer wrote that federal telework polices were ignoring “the negative impacts of remote work on cities and communities, labor productivity, and U.S. economic competitiveness, as well as the quality of government services.”  (Commercial Observer, April 14 and RER letter to President Biden).

  • “This week’s OPM announcement is another important step forward for our communities, small businesses, and local tax bases that depend on vibrant city centers,” said DeBoer. (Roundtable Weekly, April 14)

Low Office Occupancy Persists Empty office

  • Kastle reported on Monday that office occupancy rates for 10 U.S. cities fell to an average of 46%, a weekly dip of 2.2 points that reflects consistent rates of under 50% since last month. (Kastle’s Back to Work Barometer, April 17)

  • Real estate investor Sam Zell commented this week on the state of the office market and remote work, predicting a reversal in telework trends. (GlobeSt, April 20)

  • “We’re all reading about layoffs in the newspapers. It will be interesting to see what percentage of those who lost their jobs worked from home and what percentage of them are people who came into the office,” said Zell. “The office situation will change. People need to be together to develop their skills.”

The impact of return-to-the office on the industry, communities, and the economy will be a focus of discussion during The Roundtable’s April 24-25 Spring Meeting in Washington, DC. (Roundtable-level members only). 

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Energy Department Releases Latest Nationwide Data on Building Energy Use
CBECS 2018 report

The Department of Energy (DOE) this week presented its latest data on energy use in U.S. commercial buildings. The nationwide information released by DOE’s Energy Information Administration (EIA) is the basis for ENERGY STAR building scores from the Environmental Protection Agency (EPA). (EIA final results and reports

CBECS Results 

  • The latest Commercial Buildings Energy Consumption Survey (CBECS) reflects information collected in 2018. Although this is EIA’s newest building data, it is a “snapshot” in time—and does not account for occupancy rates or energy usage during or after the COVID-19 pandemic.

  • According to the 2018 CBECS, there are an estimated 5.9 million public and private commercial buildings in the U.S. across non-residential asset classes—75% of which were constructed before the year 2000. (CBECS “building characteristics” highlights)

  • Key CBECS findings on building energy consumption and expenditures include:
     
    • Building energy efficiency improved compared to the 2012 survey.
      Total floor space in commercial buildings increased yet energy consumption did not. Commercial buildings overall consumed 12% less energy per square foot of floor space in 2018 than in 2012. 

    • Electricity and natural gas accounted for about 94% of energy consumed.
      Electricity accounted for 60% of energy consumed (mostly for cooling) and natural gas for 34% (mostly for heating).

    • Large buildings were fewer but consumed over one-third of energy.
      Buildings over 100,000 square feet accounted for 2% of all commercial buildings—yet covered 34% of total commercial floor space. The newest buildings were the most energy intensive.

    • Commercial buildings spent $141 billion on energy in 2018, averaging $1.46 per square foot.
      Commercial buildings spent $119 billion on electricity, or 84% of their total energy expenditures. Natural gas accounted for 12% of total commercial building energy expenditures ($16 billion).

    • Space heating accounted for close to one-third of end-use consumption.
      Space heating was the most energy-intensive end use, especially in colder climates. Office equipment and computing were the least intensive end uses.

ENERGY STAR & NextGen Label 

EPA NextGen logo

  • EPA’s successful ENERGY STAR score—an efficiency rating for buildings—is generally based on CBECS data.
  • EPA is expected to update its models for calculating ENERGY STAR ratings in 2025, under the newly-released 2018 CBECS data. The anticipated update could greatly alter a building’s current ENERGY STAR score (presently based on 2012 CBECS data).   
  • EPA recently proposed a new voluntary label for low-carbon buildings. The NextGen label would expand upon ENERGY STAR and recognize buildings that use significant percentages of solar and other forms of renewable energy. 

The Real Estate Roundtable submitted comments to EPA last month on the NextGen building label proposal. (Roundtable letter and Roundtable Weekly, March 3) 

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Federal Appeals Court Strikes Local Natural Gas Ban on New Construction
San Diego G&E natgas pipeline

A federal appeals court on Monday struck a local law that banned natural gas hook-ups to new buildings. (Wall Street Journal, April 17 and AP News, April 18)

State and Local Gas Bans

  • In California Restaurant Ass’n v. City of Berkeley, the Ninth Circuit Court of Appeals ruled that a Berkeley, California ordinance was illegal because federal law “preempts” local building codes that try to prohibit stoves, furnaces and other appliances that use natural gas. (Politico E&E News, April 18).

  • Dozens of cities including New York, Washington, D.C, Los Angeles, and Chicago—and the states of California, Colorado, Maryland, and Washington—have passed building electrification mandates requiring new construction to install expensive heat pumps and other electric equipment for heating, cooling, and cooking.

  • New York Governor Kathy Hochul (D) has proposed a similar statewide ban on natural gas furnaces as a way to fight climate change. (Bloomberg, Jan. 23)

Impact of Court Ruling

Ninth Circuit Court of Appeals
  • The Ninth Circuit’s reasoning will likely prompt federal preemption challenges and may pose a “chilling effect” to similar state and local building decarbonization laws. (E&E News, April 18). Yet, environmental advocates maintain that the ruling is limited in scope and will not call into question other gas bans. (POLITICO, April 18)

  • Meanwhile, about 20 states have gone the other way with “bans on bans.” These laws would prohibit their cities and municipalities from stopping natural gas distribution and requiring all-electric new buildings.

  • “States and localities can’t skirt the text of broad preemption provisions” in a law passed by Congress to address the 1970s energy crisis, Judge Patrick Bumatay wrote for the Ninth Circuit’s unanimous opinion.

As its next litigation option, the City of Berkeley might ask for a fuller panel of Ninth Circuit judges to uphold its ordinance. The Roundtable will continue to monitor how local natural gas bans and related building performance standards impact federal-level policies that address real estate’s role to help tackle climate change. (Roundtable Weekly, March 3 and Jan. 20)

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