The time may be right for comprehensive tax reform. However, certain proposals floating around Capitol Hill could do far more harm than good, drowning real estate investment, and taking down the Bay Area market and the rest of the country along with it. Congress should not attempt to fix what is not broken.

Particularly troubling are proposals to change the taxation of real estate investments by allowing investors to immediately expense the full value of improvements or buildings (land is not included). While at first blush immediate expensing appears to be a huge and unprecedented tax break — real estate investors would pay virtually no taxes in the first few years of the investment — the honeymoon period would end with a crash when the write off period ended.

Ouch.

Nationwide, commercial real estate values have eclipsed their previous peak in 2007 by 23%. Locally, the Bay Area is home to three of the nation’s top 10 office markets — San Jose, San Francisco and Oakland — while the much needed supply of apartments and condos continue to be enhanced in the residential market. Real estate doesn’t need the stimulus that immediate expensing would create. Immediate expensing is akin to turning real estate into a speculative stock. Current depreciation levels are appropriate for this long-life asset class.

Continue reading at North Bay Business Journal…

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Talk of tax reform is ever-present in Washington these days, with legislators looking under every rock they can find to raise revenue for an overhaul of the tax code.

It’s a good conversation to have, but it’s easy to lose sight of the value of lesser-known tax provisions that really matter.

The Section 1031 like-kind exchange is one such example. This provision allows businesses and individuals to defer taxes owed on the sale of investment property if the proceeds of the sale are used to purchase other property of “like-kind.”

What that means is people can choose for themselves to reinvest in their business and community rather than worry about getting sideswiped by a tax bill at the end of the year.

Continue reading at The Hill…

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Shortly after November’s election it became apparent that tax reform would be a top priority for the Trump administration. That’s also when the leadership at the National Apartment Association began kicking around ideas on how to get its voice heard on the matter.

NAA President & CEO Robert Pinnegar said his organization and its members do not want to see a repeat of the last time the tax code was overhauled in 1986. “Tax reform is a huge issue for our members and something that they’ve been talking about ever since it first appeared on the horizon,” Pinnegar told Multifamily Executive. “The Tax Reform Act of 1986 really destabilized commercial real estate and severely impacted the apartment industry. It’s one of those things that people who were in the industry and actually had to survive the downturn that was created…it’s a very real issue for them and they’re very concerned on what that will do to the industry.”

With those concerns in mind, NAA launched the “Protect the Lease” campaign on Monday, which focuses on “advocating for smart tax policy that promotes economic growth, job creation, and investment in neighborhoods and communities,” according to the announcement.

The grassroots campaign seeks to ensure that the “Trump administration and Congress understand what’s at stake for the national apartment housing industry and, ultimately, the U.S. economy,” as they discuss changing the U.S. tax code.

Read more on Multifamily Executive Magazine.

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The country is on the verge of its first major tax overhaul in 30 years. Both the White House and Congress have submitted proposals to make sweeping changes to tax policy that will impact corporations and individuals alike.

In preparation for this overhaul, the National Apartment Association and the National Multifamily Housing Council launched a national grass-roots campaign Monday, mobilizing apartment industry players — from frontline employees to owners — to reach out to lawmakers about the potential effects tax reform could have on commercial real estate, and multifamily in particular.

The NAA and NMHC are calling for smart policy changes that will not cause pain to ripple through the industry like the 1986 Tax Reform Act did.

NAA president and CEO Robert Pinnegar said the Protect the Lease campaign is pushing thousands of multifamily professionals to advocate for the industry before new policy is enacted. This includes highlighting the benefits of the industry, such as job creation and economic contribution, to lawmakers on the local level.

“One of our big concerns is we don’t want the tax reform process to end up killing us on the other side,” Pinnegar said.

Read more at Bisnow.

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“When Congress last overhauled the tax code in 1986 it had a negative ripple effect across our industry,” noted NAA President & CEO Robert Pinnegar, CAE. “We learned from that experience, and we want to make sure any changes to the tax code enable investment, minimize risk, encourage entrepreneurship, protect and create jobs, and foster the development of affordable, livable communities. It should not unfairly burden apartment housing owners, operators and developers who pay taxes when they build, operate, sell or transfer communities.”

Today the apartment housing industry provides more than 20 million apartment homes for nearly 39 million Americans and supports jobs for 12.3 million people.  Together the apartment industry and its residents annually contribute $1.3 trillion to the U.S. economy. The industry counts on smart, sensible tax policies that enable it to meet the growing demand for apartment living, build businesses and develop livable communities across the country.

The “Protect the Lease” campaign is designed to: 1) highlight the benefits the industry provides – many of which could be in jeopardy if tax reform is not done right; 2) encourage industry employees to share personal stories about why certain tax reform provisions matter; and 3) share those stories with lawmakers. To learn more about the campaign visit ProtectTheLease.com.

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The National Apartment Association (NAA), America’s leading voice for the apartment housing industry, provides its members with the best range of strategic, educational, operational, networking and advocacy resources they need to learn, to lead and to succeed. As a federation of nearly 170 state and local affiliates, NAA encompasses over 72,000 members representing more than 8.8 million apartment homes globally. NAA’s purpose is to enable every single one of its members to fulfill his or her professional goals with great competence, speed and the highest standards of ethics. To learn more, visit www.naahq.org.

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Teddy Roosevelt described the vagaries and subtleties of the politics of Washington as an ever-changing “kaleidoscope.” That sentiment has never been as true as it is today. For the first time since 1986 comprehensive tax reform is a real possibility.

Not since the days of Ronald Reagan, Bill Bradley and Jack Kemp has a wholesale overhaul of America’s tax code been a serious prospect. However, with President Donald Trump’s surprise victory in November and Republican control of both Houses of Congress, the time is ripe.

Tax reform has the capacity to fundamentally reshape the multifamily industry. Nearly 39 million Americans rely on the apartment industry for their home and we added 5.8 million renter households over just the past 5 years with no let-up in demand ahead of us.

An estimated 300,000 to 400,000 units a year must be built to meet expected demand; yet, on average, just 245,000 apartments were delivered from 2012-2016. A tax reform package that promotes economic growth and investment in rental housing without unfairly burdening apartment owners and renters will spark growth and expansion and help close America’s housing gap.

That’s why tax reform really matters to the multifamily industry and the nation. To ensure that we are able to meet the growing rental demand, the National Multifamily Housing Council (NMHC) has developed core principles to guide our efforts as we work with Congress to craft a tax reform package that sparks job creation and encourages development.

Continue reading at the The Hill…

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