Legislation introduced in the House and Senate on Sept. 24 aims to fundamentally reform the private equity industry, but the expansive legislation could cause major disruption to U.S. real estate values and markets.

The newly revised Stop Wall Street Looting Act, introduced by Sen. Elizabeth Warren (D-MA) and seven other Democratic senators, as well as a coalition of progressive House members, would raise the tax rate on REIT investors, end capital gains treatment for carried interest, and greatly restrict the deductibility of interest on real estate borrowing. (Senate Banking Committee, Sept. 24 | Bill Text)

State of Play

• Sponsors seek to rein in investment by private funds. The bill authors seek to build on their successful effort this summer to expand the government's role in regulating private investment in single-family rental housing. The legislation would impose restrictions on the activities of private funds, including their acquisitions, distributions, and business operations such as outsourcing jobs or closing facilities. (Section-by-Section Summary, Sept. 24)

• Legislation's reach extends beyond Wall Street. The legislation would have far-reaching consequences for REITs, REIT investors, and real estate generally. While the sponsors highlight a specific case involving REIT ownership of health care-related property, the bill would raise the tax rate on all REIT investors by repealing the 20% deduction for qualified REIT dividends (Section 199A). (Section-by-Section Summary, Sept. 24)

• Carried interest. The bill also incorporates the Carried Interest Fairness Act (S. 445), introduced by Sen. Tammy Baldwin (D-WI). The Carried Interest Fairness Act would recharacterize all carried interest income as ordinary income rather than capital gains. (Section-by-Section Summary, Sept. 24)

• Interest deductibility. The bill would restrict business interest deductions under Section 163(j) for certain businesses controlled by private investment funds if the business has a rate of leverage (debt-to-equity ratio) greater than 50%. The proposal would calculate leverage using the adjusted basis of a business's assets rather than market value, potentially overstating the leverage on appreciated real estate. Qualifying businesses that meet the bill's conditions would also lose access to the existing real estate exception from the Section 163(j) limitation. (Section-by-Section Summary, Sept. 24)

• Health care real estate and fund fees. Other provisions would prohibit federal health care payments to certain entities that sell or pledge assets to REITs and modify rules governing taxable REIT subsidiaries that operate health care properties. Additionally, it would impose a 100% tax on certain fees, often called "monitoring" or "transaction" fees, paid by fund-controlled companies to private fund managers. (Section-by-Section Summary, Sept. 24)

• Outlook for the bill. While action on the legislation is unlikely in the near term, the sponsors will likely seek to include some or all of the provisions in tax legislation next year if control of either chamber changes.

Why It Matters

• Taken together, the proposed changes could affect a broad range of real estate businesses and investors beyond private equity funds. Eliminating the Section 199A deduction for qualified REIT dividends and changing the tax treatment of carried interest would increase tax burdens and discourage investment in real estate partnerships, REITs, and development projects. (RER Carried Interest Fact Sheet, Jan. 2026)

• Restrictions on interest deductions could create additional financing challenges for real estate owners by increasing after-tax borrowing costs, reducing property values, and complicating the refinancing of maturing debt. Because debt is a fundamental source of financing for commercial real estate investment and development, the changes could also constrain capital availability and discourage new investment. (RER Policy Priorities, Tax)

Roundtable Advocacy

• The Real Estate Roundtable (RER) has consistently opposed proposals to tax all carried interest as ordinary income, emphasizing that carried interest reflects the entrepreneurial risk and "sweat equity" contributed by general partners to real estate ventures. RER has warned that such changes could affect 2.2 million real estate partnerships and 9.7 million partners nationwide. (RER Carried Interest Fact Sheet, Jan. 2026)

• Beyond carried interest, RER has advocated for preserving the Section 199A deduction for pass-through businesses and qualified REIT dividends, as well as the real estate exception from Section 163(j). In an October 2025 letter to Treasury and the IRS, RER urged regulators to allow real estate businesses to revisit prior Section 163(j) elections to access bonus depreciation benefits restored under the 2025 tax law. (RER Letter, Oct. 17, 2025)

RER will continue working with policymakers to oppose tax provisions that could undermine real estate investment, financing, and development, while advocating for policies that support capital formation and the stability of U.S. real estate markets.

Minutes from the Federal Reserve's Sept. 15-16 meeting, released Oct. 7, indicated that most policymakers believe another interest rate increase would likely be appropriate by year-end. The minutes follow recent remarks by Federal Reserve Vice Chair for Supervision Michelle Bowman, who said she expects regulators to finalize the revised Basel III capital framework by year-end, while pointing to early results from recent leverage ratio reforms. (Federal Reserve, Sept. 18 | Federal Reserve, Oct. 1 | American Banker, Oct. 1 | Federal Reserve, Oct. 7)

Fed Outlook

• Most Federal Open Market Committee (FOMC) participants indicated that another rate increase would likely be appropriate before year-end, following the Fed's unanimous decision in September to raise its benchmark rate by 25 basis points, bringing the target range to 3.75%-4%. Officials cited persistent inflation, resilient economic activity, and diminished labor market risks in support of additional tightening. (Federal Reserve, Oct. 7 | Wall Street Journal, Oct. 7 | Associated Press, Oct. 7)

• Credit and Housing. Several participants pointed to easier bank lending standards, while a few noted that elevated mortgage rates continued to weigh on housing activity. Treasury yields rose roughly 35 basis points across the 2- to 10-year range between meetings, while residential mortgage rates increased slightly more than the 10-year Treasury yield. (Federal Reserve, Oct. 7)

• Regulatory Reform. Bowman said the Fed's recalibration of the enhanced supplementary leverage ratio (eSLR) has expanded large banks' balance sheet capacity and improved Treasury market intermediation. Dealers' Treasury positions increased from approximately $600 billion before the changes to more than $700 billion by the end of April, demonstrating how adjustments to capital requirements can support market liquidity. (Federal Reserve, Oct. 1 | Bloomberg Law, Oct. 1)

• Capital Reforms. Regulators are expected to finalize revised risk-based capital requirements under Basel III and accompanying changes to the global systemically important bank (G-SIB) surcharge before year-end. The proposals, released in March, would reduce aggregate capital requirements for the largest U.S. banks by an estimated 2.4% and revise the treatment of mortgages and mortgage servicing assets to better align capital requirements with risk. (Roundtable Weekly, March 20 | Bloomberg, March 19 | Federal Reserve, Sept. 18)

Why It Matters

• Another potential rate increase, combined with elevated Treasury yields, could extend borrowing and refinancing pressures for commercial real estate (CRE) owners. Nearly $983 billion in CRE mortgages are estimated to mature in 2027, increasing the importance of accessible financing as borrowers seek to refinance existing debt. (Federal Reserve, Oct. 7 | RER Policy Priorities, Capital & Credit)

• At the same time, appropriately calibrated capital requirements could strengthen banks' capacity and incentives to provide CRE financing. While the eSLR changes primarily address Treasury market intermediation, the revised Basel III framework could ease certain regulatory constraints on lending and support market liquidity as borrowers navigate elevated financing costs. (Roundtable Weekly, March 20 | Federal Reserve, Sept. 18 | Federal Reserve, Oct. 1)

Roundtable Advocacy

• The Real Estate Roundtable has consistently advocated for appropriately calibrated, risk-based bank capital requirements that maintain financial stability without unnecessarily limiting CRE lending. RER opposed the original 2023 Basel III proposal, warning that higher capital requirements could reduce credit availability, increase financing costs, and constrain investment in commercial and multifamily real estate. (Roundtable Weekly, March 20)

• In a June 18 coalition letter, RER and other national real estate organizations urged regulators to preserve the revised proposal's improvements while making targeted changes to avoid unnecessarily constraining CRE financing. Recommendations included more risk-sensitive treatment of CRE and multifamily loans, mortgage servicing, and securitizations, along with changes to prevent disproportionate capital charges on common financing arrangements such as mezzanine loans and preferred equity. (Coalition Letter, June 18)

RER will continue engaging with federal regulators and industry partners as the Basel III reforms move toward finalization, advocating for capital requirements that preserve credit availability, support housing and commercial real estate investment, and maintain a stable and liquid CRE finance market.