Federal Reserve Leaves Rates Unchanged

The Federal Reserve’s Federal Open Market Committee voted unanimously this week to maintain the federal funds rate at the 5.25%-5.5% range where it has been since July of last year. (Federal Reserve Press Release)

Federal Open Market Committee (FOMC) Meeting

  • After the meeting Wednesday, Fed chair Jerome Powell said at a news conference that he saw either one or two rate cuts this year as “plausible” scenarios. (Axios, June 12)
  • “What everyone agrees on is it’s going to be data dependent,” Powell added.
  • The FOMC issued a statement indicating that lowering inflation to 2 percent is their primary objective before reductions can occur.
  • The FOMC currently anticipates making four quarter-point cuts next year, bringing the federal funds rate down by 1.25 percentage points from its current level.

Congressional Pushback

  • Senators Elizabeth Warren (D-MA), Jacky Rosen (D-NV), and John Hickenlooper (D-CO) wrote to Fed chair Jerome Powell, urging the Fed to cut the federal funds interest rates from its current, two-decade-high of 5.5 percent, citing that other major central banks around the globe have made cuts or are leaning toward lowering interest rates. (Press Release | Letter)
  • Their letter also raises concerns that high interest rates are increasing the costs of housing and insurance, continuing to hurt Americans as rates remain unchanged.
  • On housing prices, the senators wrote: “The country is already facing a severe housing shortage, and the Fed’s refusal to bring down interest rates is exacerbating this shortage and driving higher inflation rates…Lower mortgage rates would encourage more people to sell their homes, which would in turn increase housing supply, decrease prices, ease the costs of renting, and ultimately increase homeownership.”
  • Sen. Sheldon Whitehouse (D-RI), chairman of the Senate’s Budget Committee, and Rep. Brendan Boyle (D-PA), ranking member of the House Budget Committee, also wrote to Chairman Powell echoing their concerns that high interest rates are exacerbating the housing supply crisis. (Letter)

Next week, at The Roundtable’s all-member Annual Meeting, we will hear economic and market forecasts from a panel of Roundtable members and Kenneth T. Rosen, Chairman, Fisher Center for Real Estate and Urban Economics at the Haas School of Business at the University of California, Berkeley; Chairman, Rosen Consulting Group.

Reports Show Single-Family Rentals Increase Housing Availability, Drive Educational Advancement

Recent studies show major investments that grow the single-family rental (SFR) market increase housing supplies for low-income and middle-class households, and create more educational opportunities for families with improved access to quality school districts.

Positive SFR Research

  • A report released last month by the U.S. Government Accountability Office (GAO) highlights the positive impact of major SFR investors in the aftermath of the 2007—2009 financial crisis. Large investors leveraged capital and technology to convert foreclosed homes into rentals, stabilizing neighborhoods and increasing housing availability. (GAO Report Highlights | Full GAO Report)
  • Another study out of UNC Charlotte, also released in May, finds that children from low- and moderate-income households see improved achievements in school when they rent single-family homes in neighborhoods where they cannot afford to buy.  (UNC Study Highlights | Full UNC Report)

Key Findings

  • Market Stabilization: The GAO explained that institutional investors bought foreclosed homes in bulk, converting them into rental properties, during the Great Financial Crisis. This helped stabilize neighborhoods and increased home values.
  • Technological Efficiency: Advanced digital platforms and online management tools enabled investors to efficiently manage large property portfolios, improving tenant experiences and reducing costs, according to the GAO.
  • Improved Housing Stock: Larger equity investors were able to underwrite substantial repairs and renovations to the units they purchase, “the cost of which is out of reach for many homebuyers,” according to a study cited by GAO.
  • Educational Achievement: According to the UNC-Charlotte study, “low-income parents [are] taking advantage of these newly available rental units” and “their children are experiencing substantial achievement gains from attending high-performing schools.”

Clear SFR Benefits

  • Expanding the supply of housing across the geographic and economic spectrum is essential for the nation’s economic vitality.
  • Large-scale SFR investments have helped revitalize distressed properties and communities, contributing to economic growth and stability.
  • “Changing lifestyles are driving people to seek more flexible housing options that also provide better education opportunities without the long-term financial commitment of homeownership. Large-scale single-family rental businesses are responding to meet this demand,” said Jeffrey DeBoer, Roundtable President and CEO.
  • As American households increasingly turn to the rental market for housing, a strong housing finance system should support homeowners and aid the expansion of affordable rental housing.

The Roundtable’s Annual Meeting on June 20-21 in Washington, DC, will feature discussions regarding the policies needed to help expand the supply of affordable and workforce housing.

Revitalizing Post-Pandemic Cities Through Building Conversions

Recent reports show property conversions are on the rise as commercial real estate and cities continue to undergo significant transformations to adapt to new post-pandemic realities. (Multihousing News, May 20 | (CBRE Report, May 29)

Construction skyline

Report Data

  • Adaptive reuse projects are on the rise, with 17.6% more apartments converted from outdated buildings in 2023 than the prior year, according to a recent RentCafe report.
  • There are currently 151,000 units underway in various stages of conversion projects across the U.S., of which 58,000 are to be redeveloped from office properties. (CRE Daily, May 30)
  • Adaptive reuse projects from former hotels are at an all-time high in the U.S., with a 38.8% increase since the previous year and almost double the volume of 2021. (RentCafe report).
  • CBRE’s “Shaping Tomorrow’s Cities” report identified six key factors that can help cities rebuild and thrive: economic dynamism, demographic potential, lifestyle vibrancy, distinctive identity, responsive governance, and resilient infrastructure.

Rebuilding Strategies

  • Converting underutilized buildings to residential use can be a cost-effective means of developing new housing, creating jobs, and generating critical sources of local property tax revenue while saving energy and reinvigorating communities.
  • However, conversions can be costly, and local governments and developers must work together to bridge the gap and aid in rebuilding cities and communities.
  • For example, Chicago is providing $150 million in public subsidies to property developers to convert four buildings in the business district to more than 1,000 apartments, with the assurance that one-third are set aside as affordable units. (WSJ, May 28)
  • In New York City, Mayor Adams created the Office Conversion Accelerator Program, which brings city agencies together to work collaboratively with developers and aims to streamline converting offices into housing. (CRE Daily, May 30)
  • “Public and private stakeholders have an integral role to play in shaping American cities. By having an all-hands-on-deck approach, the collective impact of experiences and rich data will drive insights and strategies to transform our cities,” the report said. (CBRE Report, May 29)

Roundtable Recommendations

  • The Roundtable has urged policymakers to create a robust tax incentive to help overcome the significant financial, architectural, and engineering hurdles associated with repurposing older commercial buildings as housing.
  • The incentive should complement actions taken by state and local governments to encourage property conversions.
  • The Roundtable is working with the House and Senate sponsors of the Revitalizing Downtowns Act (H.R.419) to update and improve the bill, which would create a 20-30 percent tax credit for qualifying conversion costs.
  • The credit is based on the highly successful historic rehabilitation tax credit and would apply to buildings that set aside 20 percent of their housing units for low- and moderate-income tenants.
  • In April, The Roundtable recommended a series of actions to the Biden administration to support commercial-to-residential property conversions, including leveraging various federal loan programs and tax incentives to provide financial support for CRE conversions. (Roundtable Weekly, April 19)

Property conversions and the Revitalizing Downtowns Act (H.R.419) will be discussed at The Roundtable’s Annual Meeting on June 20-21 in Washington, DC.

Roundtable and Industry Coalition Urge Congress to Enact Affordable Housing Policies and Incentives

Housing Coalition April 29, 2024 joint letter to Congress

This week, The Real Estate Roundtable and a broad real estate industry coalition encouraged lawmakers to pursue bipartisan solutions that would increase the supply of affordable and market-rate housing through specific policies and programs to help communities meet their housing challenges. (Coalition letter, April 29)

Legislation and Programs

  • The coalition letter to Congress and the Biden administration detailed policy solutions to help develop and preserve housing at all price points by enacting industry-supported bills in the House and Senate, encouraging incentive-based programs, streamlining regulatory burdens, and supporting public-private partnerships.
  • The specific proposals detailed in the letter will work best when paired with state and local government policies to meet the demand for rental homes.
  • Specific policies outlined in the letter would streamline and fast-track the entitlement and approval process; provide density bonuses and other incentives for developers to include workforce units in their properties; and enable “by-right” zoning and create more fully entitled parcels.
  • Other programs and bills defer taxes and other fees for a set period of time; lower construction costs by contributing underutilized buildings and raw land; create incentives to encourage higher density development near job and transportation hubs; and expand and strengthen the Low-Income Housing Tax Credit (LIHTC) program. Legislation would also encourage Yes In My Backyard (YIMBY) policies to remove discriminatory land use policies and other barriers that depress housing production.
  • Among the key bills strongly supported by the coalition are the Affordable Housing Credit Improvement Act (S.1557 & H.R.3238), Workforce Housing Tax Credit Act (S.3425 & H.R.6686), and Revitalizing Downtowns Act (S. 2511 & H.R.419). 
  • The coalition expects the Opportunity Zones program to spur the production of new multifamily housing, but to maximize its effectiveness, the industry groups recommend Congress revitalize and enhance Opportunity Zones to incentivize rehabilitation of housing units.

Biden Administration Proposals

The White House
  • The coalition described the Biden Administration’s Housing Supply Action Plan as a thoughtful proposal that rightly acknowledges that there is no single solution to the housing shortage. The letter also expressed support for several proposals included in the President’s FY25 federal budget proposal, including proposals to expand and enhance the LIHTC, the Neighborhood Homes Credit, and increased funding for the HOME Investment Partnerships Program.
  • However, the coalition also urged Congress to reject certain tax proposals included in the administration’s FY25 budget, such as increases in the capital gains rate. These policies would directly impact the operations of housing providers, as most are structured as “flow-through” entities where earnings are passed through to owners who pay taxes at the individual level. The tax increases under consideration would reduce real estate investment and inhibit the capital flows that are so critical to the development and preservation of critically needed housing. 

It is unlikely that new housing or tax-related legislation will be enacted before the November presidential election. Proposals now under consideration may have better opportunities for advancement in a post-election lame-duck session or during a new Congress in 2025.

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White House Recommends Policies to Increase Affordable Housing

2024 Economic Report of the President & Council of Economic Advisers

The White House Council of Economic Advisers released a report yesterday on policies to boost the supply of affordable rental and ownership units—proposals that could form the foundation of a housing push during a second Biden term. (2024 Economic Report of the President and New York Times, March 21)

Zoning Reform, LIHTC

  • The report explains that the federal government could reduce exclusionary zoning via grants and other spending, and directly subsidize affordable unit construction through programs like the low-income housing tax credit (LIHTC). The report adds, “Ultimately, meaningful change will require State and local governments to reevaluate the land-use regulations that reduce the housing supply.”

Addressing Equity

  • The Council’s report addresses how increasing the housing supply could increase access and equity for groups with few financial resources, increase overall wealth, and reduce disparities across groups. (Page 163 of the Annual Report of the Council of Economic Advisers)
  • The report notes that exclusionary zoning policies, such as prohibitions on multifamily homes, are a “subset of local land-use regulations that can constrain the housing supply and thus decrease affordability.”

This week, President Biden also spoke in Las Vegas about his plans to “establish an innovative program to help communities build and renovate housing or convert housing from empty office spaces into housing, empty hotels into housing.” (White House remarks, March 19 and Roundtable Weekly, March 15)

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White House Focuses on Affordable Housing Policy Proposals

This week President Biden and his top economic advisor previewed a new Housing Innovation Fund and forthcoming proposals to encourage additional housing development. The White House’s focus on affordable housing confirmed it will be a top administration priority as the presidential election season picks up momentum. (Politico, March 14)

Administration’s Housing Remarks

  • Following his March 6 State of the Union address, which addressed new tax incentives for homebuyers and an expansion of the Low-Income Housing Tax Credit (LIHTC), President Biden spoke this week about other aspects of his housing plan. (Roundtable Weekly, March 8 | White House Fact Sheets: Budget, March 11 and Housing, March 7)
  • Biden stated during comments at the National League of Cities, “The federal budget that I’m releasing today has a plan for 2 million more affordable homes, including housing — a housing innovation fund to help communities like yours build housing, renovate housing, and convert empty office space and hotels into housing. The bottom line is we have to build, build, build. That’s how we bring housing costs down for good.” (White House transcript and C-Span video, March 11)

New Initiatives

White House National Economic Advisor Lael Brainard
  • White House National Economic Advisor Lael Brainard, above, also addressed the president’s housing proposals this week. “While tax credits are a proven way to boost supply, it is also vital to support the efforts of governors, county executives, and mayors who are pioneering new approaches that can be scaled. That’s why the president is proposing a new $20 billion Innovation Fund for Housing Expansion to help communities expand their housing supply,” Brainard remarked. (White House transcript, March 12)
  • Brainard also previewed forthcoming administration housing policies. “In the months ahead, we will take further action– from supporting communities in identifying and removing barriers to housing production to promoting the use of federal resources for conversions from office to residential,” Brainard said. (Urban Institute video of speech and interview, March 12)
  • She confirmed that “the centerpiece of the president’s Plan is an expansion of the Low Income Housing Tax Credit (LIHTC) that would produce or preserve 1.2 million affordable units over the next decade.” (HousingWire, March 12)

During a Senate Banking hearing on March 12 on Housing Affordability, Availability, and Other Community Needs, bipartisan support was also expressed for expanding the LIHTC—a policy strongly supported by The Roundtable. (Roundtable Weekly, March 1 and Feb. 16)

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Policymakers Emphasize Affordable Housing Incentives, Increasing Supply 

Three U.S. Senators discussed national housing policy with industry leaders and Roundtable members during this week’s State of the Industry (SOI) meeting. (See Meeting agenda)

Need for Housing Incentives

Sen. Ron Wyden (D-OR)
  • Senate Finance Committee Chairman Ron Wyden (D-OR) discussed the importance of expanding and extending the Low-Income Housing Tax Credit (LIHTC), which was included in a tax package advanced by the House Ways and Means Committee last week by a vote of 40-3. Sen. Wyden negotiated the $77 billion bill with Ways and Means Chairman Jason Smith (R-MO) and commended the overwhelming margin of bipartisan support in the committee vote. (Roundtable Weekly, Jan. 19)
Housing Panel at RER's 2024 State of the Industry Meeting.  Moderator Kathleen McCarthy, Blackstone
  • Sen. Maggie Hassan (D-NH), center, discussed what can be done to address U.S. housing challenges with Kathleen McCarthy, left, (Chair-Elect, The Real Estate Roundtable | Global Co-Head of Real Estate, Blackstone), and Shaun Donovan, right, (CEO and President, Enterprise Community Partners |former HUD Secretary and OMB Director). Sen. Hassan spoke about the urgent need for national policy to encourage development of more workforce housing, while Mr. Donovan noted the congressional tax bill under consideration would create 200,000 new affordable housing units.
Sen. Debbie Stabenow (D-MI) at RER's 2024 State of the Industry meeting
  • Sen. Debbie Stabenow (D-MI)– introduced by Roundtable Chair Emeritus (2012-2015) Robert Taubman (Chairman, President & CEO, Taubman Centers, Inc.) – spoke about legislative efforts to revitalize downtowns. Sen. Stabenow referred to the recent tax package as an encouraging development for affordable housing, yet noted how more is needed to incentivize conversions of commercial properties to multifamily use. Stabenow is an original co-sponsor of the Revitalizing Downtowns Act (H.R. 4759) to encourage adaptive use of older buildings.

Housing policy and incentives advocated by The Roundtable to encourage more affordable housing supply are topics weaved throughout RER’s 2024 Policy Priorities. (See Executive Summary)

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Senate, House Bills Introduced to Spur Workforce Housing Development

Bills introduced yesterday in the Senate and House would create a new tax incentive aimed at increasing the supply of moderate-income rental housing. The legislation seeks to expand the construction and rehabilitation of housing for middle-class families and young people starting their careers, while enabling workers to live in communities where they are employed. (Senate Finance Committee news release and bill summary, Dec. 7)

Workforce Housing Tax Credit

  • Senate Finance Committee Chair Ron Wyden, (D-OR) and Sen. Dan Sullivan (R-AL), along with Reps. Jimmy Panetta (D-CA) and Mike Carey (R-OH), introduced the bipartisan Workforce Housing Tax Credit (WHTC) Act to build on the successful Low-Income Housing Tax Credit (LIHTC) by enabling state housing agencies to issue tax credits to developers, which would subsequently be sold to investors. (1-page Senate Finance committee summary and WHTC bill text)
  • WHTC credits could be used to build affordable housing for tenants between 60% and 100% of area median income, or transferred to LIHTC for tenants generally below 60% of area median income. (Congressional Research Service summary of the LIHTC, April 26)
  • State housing finance agencies could allocate WHTC credits to developers through a competitive process. The tax credits could also be provided to developers with a 15-year compliance period and 30-year extended commitment.  (Committee summary)

Roundtable Support

  • The Roundtable strongly supports the WHTC. Roundtable President and CEO Jeffrey DeBoer stated, “Tax policy should support and encourage private sector investment that boosts the supply of affordable and workforce housing. The Workforce Housing Tax Credit Act would build on time-tested tax incentives like the low-income housing tax credit and further facilitate the conversion of underutilized, existing buildings to housing. We welcome this positive step forward for our nation’s housing supply.”

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) has formed an Affordable Housing Working Group, which is working with the Research Committee to develop proposals on expanding the nation’s housing infrastructure.

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2023 Annual Report – Sustained Strength, Sustained Solutions

View Full Report – 2023 Annual Report – Sustained Strength, Sustained Solutions

    Roundtable Comments on Clean Energy Tax Credits for Low-Income Communities, Housing

    Low-income housing development in New Jersey

    The Real Estate Roundtable submitted comments today on a proposed rule from the IRS and Treasury Department regarding “bonus” tax credits for renewable energy investments in low-income communities, passed by Congress as part of the Inflation Reduction Act (IRA). (Roundtable Comment Letter, June 30) 

    Solar, Wind Bonus Credits 

    Roundtable Comments 

    RER chart on Section 48(e)
    • Treasury and IRS proposed a rule on June 1 to implement the low-income bonus program. Today’s comments from The Roundtable seek greater clarity and certainty for building owners that may access the bonus credits, raising the following points:

      • The bonuses are available only for solar or wind projects that generate under 5 megawatts of electrical output. The Roundtable requested a more straightforward rule for what constitutes a “single project” for purposes of this output threshold.

      • The IRA’s text requires that multifamily building owners must share “financial benefits” of renewable energy produced on-site with tenants. The Roundtable’s comments stressed that any such benefits should not depend on utility bill savings that accrue directly to tenants—because owners cannot measure, track or control energy consumption in sub-metered leased units.

      • Low-income housing supported by non-federal programs through state- and local-level housing finance agencies or public housing authorities should also be eligible for the IRA’s low-income bonuses.

      • The proposed rule would offer a preference, not based in the statute, for non-profit owners to receive bonus credit allocations. The Roundtable’s comments urge there should be no bias against business taxpayers to receive the bonus to further the Biden administration’s climate policy goals for rapid deployment of renewable energy investments in low-income communities.  

    • Future Roundtable comments on IRA topics are in the works. Feedback on a proposed rule to buy-and-sell certain clean energy credits is due August 14. In addition, proposed rules to implement the 179D tax deduction for energy efficient retrofits of commercial buildings are expected this summer. 

    Prior comments, information and summaries on The Roundtable’s advocacy efforts regarding clean energy tax incentives are available on our Inflation Reduction Act resources page and in Roundtable Weekly (Dec. 2, 2022 and Nov. 4, 2022).  

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