Kevin May
Director, GRS Group
(310) 614-9329
[email protected]
Now that the House has passed its version of the tax reform bill, and the Senate Finance Committee has done the same, we are getting closer to something becoming law, at least for now. To follow up GRS Group’s prior post on the House tax proposal, it’s time to take another look at how the commercial real estate industry is weighing in on this important subject before Congress has something ready for President Trump to sign, some say by Christmas.
There is a lot of talk about how the current proposals would not be friendly to the affordable housing sector of multifamily. At issue is the low-income housing tax credit program, which reportedly needs to remain in effect, or it would eliminate financing for about half of all affordable units being built. In addition, a private activity bond program that funds such projects would be cut as well under the House GOP plan.
Some are saying that about 900,000 new affordable units in an environment where affordable multifamily units are in high demand, especially in urban markets where prices have rapidly increased. These types of credits are especially important because developers often can’t cover development costs to build assets in those areas because they won’t collect enough revenue in rents.
In the House version, the Historic Tax Credit has been stripped out, which reportedly provided funding to renovate about 40,000 buildings while being a catalyst for $117 billion in private funding since it was introduced in 1981, according to Curbed.
Meanwhile, one aspect that’s a positive for many investors so far is the 1031 Exchange sector, which especially impacts that active net lease market. This will remain tax free – as of now, promoting continued transactions in this space.
Bisnow also reported that a 25 percent cap on the tax rate from REITs’ dividends could make them more attractive for some investments. And some argue that lowering the overall corporate tax rate could make it possible for larger commercial real estate companies to spend that money to attract talent and hire additional employees and possibly lead to increased real estate demand, Robert Knakal of Cushman & Wakefield was quoted as saying.
But the tax reform issue is not yet over. We will try to update you with the coming actions that impact commercial real estate, with industry reactions, when they happen.
About GRS Group
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.
Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance. We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies and delivering customized solutions to assist our clients in achieving their investment goals.