White House Directs Agencies to Increase Return of Employees to Federal Offices
White House Chief of Staff Jeff Zients, above, directed Cabinet officials on Aug. 4 to increase the return of federal employees to their offices this fall as a “critical” part of fulfilling the mission of government agencies. The Real Estate Roundtable has urged President Biden and national policymakers for months to end government policies that encourage remote working arrangements for federal employees. (Government Executive, Aug. 7 | Axios, Aug. 4 | RER letter to President Biden, Dec. 12, 2022)
Back-to-Office Fed Policies
Zients informed administration officials, “As we look towards the fall, your agencies will be implementing increases in the amount of in-person work for your team. This is a priority of the president — and I am looking to each of you to aggressively execute this shift in September and October." (Reuters, Aug 5 and The Washington Post, Aug. 4)
Empty federal offices have depressed local economies, according to a July 18 Federal News Network (FNN) broadcast. (Listen or read transcript from Federal Drive with Tom Temin)
An updated list of agencies’ return-to-office policies is available online through the Federal News Network. Meanwhile, Republican leaders on the House Oversight and Accountability Committee have also urged agency officials to encourage a return-to-office, threatening this week to “resort to compulsory measures” in their probe of federal agencies’ telework polices.
Roundtable Weighs In
In an April letter to all U.S. Senators, Real Estate Roundtable President and CEO Jeffrey DeBoer, above, emphasized, “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.” (RER letter to the Senate, April 12).
In a similar letter to President Biden in December, DeBoer noted that federal telework policies 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, Dec. 12)
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House Democrats Urge Federal Regulators to Incentivize CRE Conversions
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)
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 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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Climate and Labor Policy
New Federal Rules Issued Regarding Real Estate Construction, Clean Energy Projects
The Biden administration issued two new rules this week impacting real estate construction and investments in clean energy projects.
Davis-Bacon: The U.S. Labor Department on Tuesday issued a final rule to overhaul Davis-Bacon standards that determine prevailing wages for workers on construction projects covered by a federal contract or financially assisted by federal grants, loans, guarantees or insurance.
Construction association AGC issued a statement expressing “preliminary” concerns that “this rulemaking critically missed an opportunity” to inject “more accurate data” in processes to establish prevailing wage rates in local markets across the nation.
Laborers and mechanics constructing transportation, energy, water, toxic site clean-ups, and other infrastructure financially supported by the bipartisan Infrastructure Investment and Jobs Act (IIJA) must meet the new Davis-Bacon requirements. (IIJA project map)
Inflation Reduction Act (IRA)projects receiving clean energy tax incentives are not required to meet Davis-Bacon rules, but they can qualify for increased credits and deductions if workers are paid prevailing wages. (RER’s IRA fact sheets)
“Bonus” Tax Credits: The Treasury Department and IRS on Thursday released final rules explaining how IRA “bonus credits” can be awarded to solar, wind, and associated storage projects in low-income communities. (The Hill, August 10)
Qualifying projects in census tracts eligible for new market tax credits (NMTCs) can receive a 10% solar credit boost, while those supported by low-income housing tax credits or Section 8 rental assistance can receive a 20% solar credit increase. (RER’s IRA “bonus rate” chart)
The “bonus” incentives – over “base” rate tax credit amounts – are competitive. Bonuses will be awarded through an application process run by the U.S. Department of Energy scheduled to open this fall.
The Roundtable submitted comments in June when the IRS proposed the “bonus credit” program. (Roundtable Weekly, June 30). It will update its summary of IRA-related agency guidance following analysis of the newly issued rule.
The Real Estate Roundtable has released its FY2023 Annual Report, which coincides with the June 30 conclusion of the organization's fiscal year. The report details how the industry experienced significant transformation due to the global pandemic—yet emerged resilient and adaptive, achieving successes over the past 12 months on several national issues in the tax, energy, and capital formation policy areas.
Roundtable Policy Issues
In the introduction to “Sustained Strength, Sustained Solutions,” Roundtable Chair John F. Fish (Chairman & CEO, Suffolk) and Roundtable President and CEO Jeffrey DeBoer state, "Adapting to this new reality requires us to rethink how businesses and people use offices, retail and entertainment spaces, housing, medical care, and more. Future buildings must accommodate the changes brought on by the pandemic, as well as those that accompany the rapidly evolving artificial intelligence and technological world. The real estate industry is at the center of this transition, where the future of work, the future of housing, the future of our communities, and much more are being reimagined before our eyes."
The Roundtable leaders add, "However, we are also mindful that embracing these changes is not without its costs and time constraints, and as has proven in the past to be true, the industry’s ability to respond to these changes will be inhibited or encouraged by public policy actions."
The Roundtable’s FY2023 Annual Report details the organization's mission, recent activities, and offers potential policy solutions to today's pressing and far-reaching industry challenges, including: