Contributing Authors: Cindy Chetti, Matthew Berger and Eileen Lee
With the Biden Administration and Congress focused on the possibility of enacting legislation to address the nation’s infrastructure needs, Congressional committees convened this week to discuss potential priorities and how such measures might be financed. In connection with hearings held by the House Ways and Means, Senate Finance and Senate Banking Committees, NMHC weighed in to underscore the importance of including housing provisions, while also warning against enacting tax pay-fors that would erode job creation and hinder economic growth.
NMHC Makes the Case that Housing Is Infrastructure
On May 19, NMHC spearheaded a real estate coalition letter and joined NAA in sending an apartment industry letter to the Senate Banking Committee offering our support for measures that back the interconnectivity between housing and infrastructure and promote housing development at all income levels. The coalition recommended the committee consider provisions that would:
- Invest in housing and infrastructure that includes solutions to address the nation’s most pressing housing challenges;
- Incentivize localities to reduce barriers and adopt policies to encourage private sector investment in housing;
- Reduce regulatory barriers and invest in programs that have proven to increase voluntary property owner participation in the Section 8 Housing Choice Voucher Program.
Proposed Revenue-Raisers Could Inhibit Housing Production, Job Growth and Economic Recovery
NMHC strongly supports infrastructure legislation and has long made the case that housing is infrastructure. However, we are extremely concerned that the Biden Administration’s proposed pay-fors would inhibit our ability to develop multifamily housing and enable owners to pass their life’s work to future generations who continue to operate the asset. Furthermore, these proposals would undermine the very infrastructure goals the Administration seeks to achieve by: reducing opportunities and economic rewards for cash-poor business owners; hindering real estate investment, particularly in affordable housing; and undercutting the tax base in localities that rely on these taxes to finance schools, police, and other first responders.
To illustrate the potentially detrimental impacts of such proposals, NMHC also helped spearhead a coalition letter to the House Ways and Means and Senate Finance Committees that outlines our perspective on some of the revenue-raising proposals offered by the Biden Administration. Specifically, the letter highlights that these proposals would:
- Limit to $500,000 a taxpayer’s ability to defer gain associated with a like-kind exchange;
- Tax capital gains at a statutory 39.6 percent rate for taxpayers earning in excess of $1 million;
- Eliminate the capital gains tax treatment of carried interest; and
- Tax unrealized capital gains at death while making death a taxable event at far lower levels of income than under present law.
There’s Much Work to Be Done in Washington
These letter submissions reflect the broader work NMHC is doing daily to educate policymakers about the importance of the multifamily industry. The stability of the multifamily sector is critical to not only our nation’s infrastructure, but also to the economy at large.
Policymakers have an historic opportunity to make a once-in-a-generation investment in our nation’s infrastructure. Prior to the onset of the COVID-19 pandemic, the country was facing a nationwide housing affordability challenge and an unprecedented demand for new rental housing. Unfortunately, the financial distress brought on by the pandemic has only exacerbated this crisis—leaving the housing market and greater economy more vulnerable than ever.
NMHC will continue to advocate for infrastructure policy that will address the housing affordability crisis and preserve the future stability and viability of the housing industry by driving new investment in housing; promoting transit-oriented and high-density development; funding community-level infrastructure needs; and encouraging incentives to assist the industry to transition to a new energy economy.
We will also continue to emphasis the key role that today's tax s on capital gains, carried interest, like-kind exchanges and stepped-up basis play in our ability to take the risks necessary to develop multifamily real estate, address the nation’s housing affordability challenges and ensure that assets can be transferred to heirs without forcing an untimely sale just to pay tax. We are continuing to make the case with policymakers that tax changes often have unintended consequences—the commercial real estate depression and economic recession that followed the Tax Reform Act of 1986 is a clear case in point. Well-intended provisions went too far and led to an exodus of capital from real estate markets, which reduced property values and threatened the solvency of real estate lenders.
As NMHC staff continues to meet with members of Congress and their staffs on these issues, we encourage you to do so as well. In the meantime, we welcome your thoughts as to how these proposals would impact your ability to conduct your businesses. Contact NMHC SVP of Government Affairs Cindy Chetti or NMHC VP of Tax Matthew Berger to share your thoughts.
For more information on NMHC’s advocacy work, please visit the NMHC Policy Priorities webpage.
Related Resources
- Infrastructure Policy Issue Webpage
- Study: The Tax and Economic Impacts of Section 1031 Like-Kind Exchanges
- Study: Economic Impact of Repealing Like-Kind Exchange Rules
- Study: Repealing Stepped-Up Basis Would Damage the Economy
