Below were CRE reactions to the House of Representatives’ tax reform plan. Look here next week for what industry leaders are saying about the Senate’s plan.
The American people finally have a tax plan moving forward after the House of Representatives approved a bill that has reform measures.
Of course, along with what goes with it involves a lot of squabbling between parties and hairsplitting, and now another tax plan is making its way through the Senate, which will probably gather plenty of scrutiny as well.
The CRE community has scrutinized former incarnations of tax reform, especially ones that impact 1031 exchanges.
So far, at least two organizations that are important to the commercial real estate industry have weighed in, including the CRE Finance Council (CREFC) and the National Association of Homebuilders (NAHB). Both have different takes on the emerging bill.
CREFC was hesitantly positive in its first interpretation of the “Tax Cuts & Jobs Act.” The council applauded the continuation of 1031 exchanges, which have a major industry impact in regards to the capital that can flow into assets from several sources with taxation breaks and drives much of the investment into single-tenant net-lease assets. It was hopeful that interest deductions, cost/recovery depreciation, and the allowance of 1031 would continue in their current forms.
The hesitancy is based on what shape the bill will morph into after it passes through the rest of Congress and what form its future could take.
Meanwhile, NAHB, which is indirectly involved in commercial real estate, since much of the industry follows, and plans on, the construction of new housing, had strong words on the subject. Its issue is the capping of mortgage interest deduction, which the organization says could reduce the desire for people to become homeowners or buyers.
From a multifamily commercial real estate standpoint, this could seem like a good thing, based on this property type’s health in a troubled housing market. However, if NAHB’s assertations are true, then it could impact other parts of CRE. Several retail and office developments are planned, in large part, based on where there will be new household formation. If this is hampered as a result of legislation, it could have an adverse impact on new development in these areas.
But given this political climate, it’s hard to tell what the final proposal could be and how it relates to commercial real estate. Though something seems to be in the works to pass by the end of the year, commercial real estate still plays a waiting game to see the results of a final bill.
Nothing has actually happened yet to negatively impact the industry, but as we all know, uncertainty does not help investor enthusiasm.
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