Originally published on October 4, 2023, for NAIOP.

At this time last week, most observers of Washington politics believed that a shutdown of federal government operations was all but inevitable, having been inundated with media reports warning of a looming fiscal crisis. The current fiscal year was set to expire at midnight on Saturday, Sept. 30, unless a temporary stopgap measure known as a continuing resolution (CR) was passed by the House of Representatives and the Senate and signed by President Joe Biden. Speaker of the House Kevin McCarthy had failed to win over a small cadre of far-right conservatives to support versions of a CR that would have funded several Republican priorities such as increased funding for border security.

With only a five-seat margin in the House, McCarthy could not pass a CR without turning to Democrats. For their part, Democrats for weeks had demanded a so-called “clean” CR – one without extraneous policy provisions that would maintain current funding levels for a period of time. As the Senate appeared to coalesce on a funding measure with higher spending levels, House Democrats shifted their preference toward the Senate version. A far-right faction within the House Republican conference, led by Rep. Matt Gaetz (R-FL), had threatened to strip McCarthy of his speaker’s gavel if he relied on Democrats to pass a CR. The conventional wisdom was that McCarthy would not risk his position and a fiscal stalemate would result.

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Originally published on September 6, 2023, by Eric Schmutz for NAIOP.

Welcome to September! With temperatures starting to cool down, kids heading back to school, and football season kicking off, it’s easy to forget that the federal fiscal year ends at the end of the month. That means that there are only 11 days when both the House and the Senate are scheduled to be in session before the current federal funding authorization expires. Moreover, only one of the annual appropriations bills has passed the House and none have passed the Senate.

In most years, the House and Senate leadership would simply agree to a continuing resolution (CR) that maintains existing federal policy and holds funding at current levels for a certain period to prevent a government shutdown before Oct. 1. Leadership would then negotiate an omnibus package that includes all 12 of the annual appropriations bills, and just when congressional members are desperate to get home for the winter recess, pass it late at night and leave town. 

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Originally published on August 2, 2023, by Aquiles Suarez for NAIOP.

August has arrived, which for Capitol Hill means that Congress is in recess until sometime in September. Senators, congressional representatives and staff members scatter across the world on congressional delegation trips (so-called “codels”), and back to their home districts to meet with constituents, host fundraisers and boast about their legislative achievements. Well, perhaps all of those things are true with the exception of the last bit. 

The reality is that Congress left town last Friday with little agreement on a path forward for must-pass appropriations bills to keep the federal government operating past the start of the new fiscal year on Oct. 1. While congressional Democrats have been given their talking points on the economy by the White House, House Republicans had hoped to be much further along on their agenda to limit government spending by the time of the August recess. But only one of 12 appropriations bills that need to be passed and signed into law by the start of the new fiscal year has advanced in the House. And disagreement among Republicans on a proposed tax package has clouded the outlook for any tax legislation made into law this year.

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Originally published on June 21, 2023, by Aquiles Suarez for NAIOP.

Last week, House of Representatives Ways and Means Committee Chairman Jason Smith (R-MO) kicked off what is expected to be months-long congressional negotiations over tax legislation. After a markup session that lasted nearly 10 hours, the tax committee passed three pieces of legislation that will be packaged together to comprise the American Families and Jobs Act. The bills passed on a purely partisan basis, with no Democrats on the committee voting in support, and with little chance that the combined bill would pass the Democratic-controlled Senate in its current form. As such, the committee’s action is seen as House Republicans’ first step on the road to talks with their Democratic Senate counterparts, possibly culminating in a year-end, bipartisan tax package.

The three bills passed by the Ways and Means Committee are:

• The Tax Cuts for Working Families Act (H.R. 3936);
• The Small Business Jobs Act (H.R 3937); and
• The Build It in America Act (H.R. 3938).

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Originally published on May 25, 2023, by Marc Selvitelli, CAE for NAIOP.

Today the Supreme Court issued a unanimous decision in Sackett v. EPA, a case involving the jurisdiction of the Clean Water Act and the definition of “Waters of the United States” (WOTUS), and an issue on which NAIOP has been active on behalf of commercial real estate.  In a victory for NAIOP members and the CRE industry, the Court ruled that the Clean Water Act extends only to wetlands that are “as a practical matter indistinguishable from waters of the United States” and that have a continuous surface connection with that water.

For many years, NAIOP has advocated for commonsense regulation to protect our nation’s wetlands that is clear, increases predictability and consistency in EPA and Army Corps of Engineers wetlands decision-making, and reduces unnecessary permitting delays. Our most recent comments on the Biden administration’s WOTUS rule reflected this approach. Today’s Supreme Court decision finally clarifies the legal test needed to determine whether a federal wetlands permit is required for a development project. This will go a long way to reducing the uncertainty and added costs of delay that were the result of the legal ambiguity that existed.

The Biden WOTUS rule had been suspended in 26 states as a result of legal challenges. Today’s Supreme Court ruling will most likely force changes to the Biden administration’s regulation to ensure its application is consistent with the decision. NAIOP members should rest assured that we will continue to work with federal policymakers as regulations governing our industry are developed.

As always, please feel free to ask any questions about this or any of our advocacy positions.

Mortgage borrowers with good credit may face higher costs under a new plan from federal mortgage associations Fannie Mae and Freddie Mac.  The firms have released a new Loan–Level Price Adjustment (LLPA) Matrix for loans sold to them after May 1, 2023.  Under the new matrix, borrowers with high credit scores will face higher mortgage fees than before and those with lower credit scores will face lower fees.

• Under the new rules, high-credit buyers with scores ranging from 680 to above 780 will see a spike in their mortgage costs – with applicants who place 15% to 20% down payment experiencing the biggest increase in fees.
• LLPAs are upfront fees based on factors such as a borrower's credit score and the size of their down payment.  The fees are typically converted into percentage points that alter the buyer's mortgage rate.
• Under the revised LLPA pricing structure, a home buyer with a 740 FICO credit score and a 15% to 20% down payment will face a 1% surcharge – an increase of 0.750% compared to the old fee of just 0.250%.
• Meanwhile, buyers with credit scores of 679 or lower will have their fees slashed, resulting in more favorable mortgage rates.  For example, a buyer with a 620 FICO credit score with a down payment of 5% or less gets a 1.75% fee discount – a decrease from the old fee rate of 3.50% for that bracket.

We strongly support housing affordability and are on record promoting six specific strategies aimed at achieving just that, but the approach summarized above is misguided and not likely to achieve its intended purpose.

Members from NAIOP’s three chapters are in Raleigh today to advance the priorities of the commercial real estate development industry in meetings with state lawmakers. The 2023 Legislative Priorities focus on economic development initiatives, tax measures, and regulatory reforms that meet the current and future growth within the state.

A top priority for NAIOP of North Carolina this year is local permit reform legislation that reduces inefficiencies and brings more accountability, consistency, and transparency to the process. The passage of HB 332/SB 275I will achieve this by establishing a 21-day period for a local entity to review an application. If the local permitting entity is unable to meet this timeframe, the applicant may seek approval from a third-party (engineer) or the Department of Insurance. Other elements of the bill include:

• During the 21 days, the local entity shall resolve issues associated with the application and may seek additional information from the applicant.
• If additional information is needed or the application must be resubmitted, the permitting entity has 15 days from receipt of the additional information to issue a permit.
• Upon acceptance of a certified approval of an application, the local government shall have 72 hours to issue the permit and refund all applicable fees.
• Upon permit issuance based on third-party certification, the local government and inspection department are released from any liabilities, responsibilities, or claims arising under this legislation.

NAIOP members are distributing a Permit Reform Flyer during meetings to ensure lawmakers are informed and educated on the significance of this legislation for the industry. The flyer reflects the importance of passing HB 332/SB275 now!

NAIOP’s Day at the State Capitol underscores the importance of NAIOP and its members remaining engaged at every level of government to ensure the interests of commercial real estate are considered during the policymaking process.

Originally published on April 18, 2023, by Eric Schmutz for NAIOP.

Congress returned this week from its Easter and Passover recess facing what promises to be a heated debate over raising the nation’s borrowing limit. On Monday, House Speaker Kevin McCarthy visited Wall Street to debut the latest House Republican proposal to raise the debt ceiling. In his speech, McCarthy stated that in the coming weeks, the House would approve a one-year increase in the debt limit that will include a reduction in discretionary spending to 2022 levels while limiting future increases to 1% annually over the next 10 years.  

This is the Republicans’ first proposal to raise the debt limit since U.S. Treasury Secretary Janet Yellen informed Congress on Jan. 13 that the federal government would exceed its borrowing authority of $31.38 trillion a week later, on Jan. 19. If  McCarthy is able to get his proposal approved by the House, it will show an unprecedented level of Republican unity and will significantly strengthen his hand in negotiations with President Joe Biden, who demanded a “clean” debt ceiling increase during their Feb. 1 meeting – the only time the two have met in person on the topic.

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Originally published on April 5, 2023, by Leona Savoie for NAIOP Newsletter.

The Canadian government enacted legislation on Jan. 1, 2023, that disrupted commercial and residential real estate development across the country. The Prohibition on the Purchase of Residential Property by Non-Canadian Act (the “Act”)  was originally intended to be a demand-side solution to make housing more affordable for Canadians by prohibiting residential purchases by non-Canadians over the next two years. However, the regulations under the Act, released only a week before enactment, unintentionally halted commercial investment in current and future residential and mixed-use projects in major metro areas.

The NAIOP Research Foundation issued a report last August highlighting the importance and contributions of commercial real estate to the Canadian economy. The report, specifically, found that the industry generated the following economic benefits in 2021:

• Generated $148.4 billion in net contribution to GDP.
• Created and supported 1.0 million jobs, of which 372,710 are direct jobs.
• Generated $67.5 billion in labor income for workers.

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Originally published on March 15, 2023, by Aquiles Suarez for NAIOP.

President Joe Biden submitted his proposed fiscal year 2024 federal budget to Congress on March 9. While the term “March Madness” is usually associated with the NCAA’s college basketball tournament, you could be forgiven if you thought it might also apply to this budget proposal. That’s because it contains numerous tax increases that repeatedly failed to clear the House of Representatives and Senate when these chambers were controlled by Democrats. With the House now in the hands of a Republican majority, chances are low that a majority of these recycled provisions will make it into legislation.

But the president’s budget submission makes sense if you acknowledge that its primary purpose is as a political messaging document, meant to provide a contrast between his administration and Republicans in advance of the 2024 presidential election. It was somewhat predictable, therefore, that tax proposals which were part of the Biden “Build Back Better” agenda would resurface in the 2024 budget version. Anticipating this would be the case, earlier this year NAIOP members attending our Chapter Leadership and Legislative Retreat in Washington, D.C., met with their elected representatives on Capitol Hill, with tax policy a top NAIOP legislative priority discussed at their meetings. 

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Originally published on January 18, 2023 by Aquiles Suarez for NAIOP E-Newsletter.

In less than two weeks – and for the first time since February 2020 and the start of the COVID-19 pandemic – NAIOP members and chapter local executives will be headed to Capitol Hill to meet with their elected representatives, senators and congressional staff. In so doing, they will be taking the opportunity to establish relationships with newly elected members of Congress, renew and deepen existing ties with incumbents, and talk to their elected officials about issues important to the commercial real estate industry.

All of this occurs as part of NAIOP’s Chapter Leadership and Legislative Retreat (CL&LR), a three-day conference where local NAIOP chapter executives and their leadership come together in our nation’s capital to talk about their chapters, share best practices, and spend a day meeting with their elected federal representatives on Wednesday, Feb. 1, Capitol Hill Day. For much of the next two weeks, NAIOP members coming to Washington, D.C. will be scheduling meetings with their senators and representatives to discuss NAIOP’s 2023 Federal Priorities with them.

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Originally published on January 4, 2023, by Aquiles Suarez for NAIOP E-Newsletter.

A word that has been repeatedly used to describe the workings of Congress is “chaos.” So why should we expect things to change just because it’s a new year? The spectacle put on by the new Republican majority in the House of Representatives trying to choose a speaker this week clearly shows that nothing will be a sure thing in this Congress.

Kevin McCarthy (R-CA), the Republican minority leader in the last Congress who wanted to be speaker in the next, after his party won a slim majority in the 2022 congressional midterm elections, failed to get the needed number of votes on the first round of voting. Then he failed on the second round. Ditto on the third try.  Meanwhile, House Democrats were clearly enjoying the Republican dysfunction, with all of them voting for their leader, Hakeem Jeffries (D-NY), giving him more votes than McCarthy. While Jeffries was not going to get enough votes to become the speaker, it was great optics for House Democrats who were united while Republicans appeared disorganized.

Choosing a speaker is the first order of business for a newly elected Congress. It’s a constitutional requirement, and nothing in the House happens until a speaker is chosen. Members cannot be sworn in, committee assignments cannot be made, and Congress cannot consider legislation. It has been 100 years since a speaker was not chosen by a new Congress on the first ballot.

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Originally published on December 14, 2022 by Toby Burke for NAIOP E-Newsletter.

While the primary focus of the national media during the 2022 election may have been on a potential “red wave” for control of the U.S. Senate and House of Representatives, there were over 6,200 state legislative races in 46 states according to the National Conference of State Legislatures. The outcomes of these state races significantly impact core policy issues of importance for commercial real estate, such as taxes, regulations and economic development. Generally, political pundits may conclude that the status quo was maintained in this election cycle, with Republicans remaining in political control in a majority of state legislatures and Democrats making modest but significant gains in a few.

Both the Republican Legislative Campaign Committee and the Democratic Legislative Campaign Committee can claim political successes, either maintaining or flipping political majorities in certain state chambers. These include lowering a chamber’s majority by the opposing party gaining seats, or ending veto-proof majorities. 

The post-election analysis by MultiState shows 28 state legislatures under full Republican control, compared to 20 legislatures under full Democratic control. The political parties in the commonwealths of Pennsylvania and Virginia will have divided control between the two chambers heading into the 2023 session. Prior to this year’s election, Republicans controlled 30 state legislatures to 17 by the Democrats with 3 under divided control: Alaska (House bipartisan coalition), Minnesota and Virginia. The election breakdown by Multistate reflects Democrats taking over chamber majorities in the Michigan legislature, the Minnesota Senate, and the Pennsylvania House.

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Originally published by NAIOP E-Newsletter on December 13, 2022. 

Senate budget negotiators were at an impasse last week with a Dec. 16 deadline looming for passing a spending measure that would keep the government funded. Indications are that bipartisan negotiations will continue, however, after Democrats delayed introducing their own partisan omnibus funding legislation. Senate Appropriations Committee Chairman Patrick Leahy (D-VT), the lead Senate negotiator, stated that he was holding off the introduction of an omnibus appropriations bill because progress in bipartisan talks had been made over the weekend.

Congress is expected to pass a temporary stopgap measure extending the funding deadline for another week, until Dec. 23, to give negotiators more time to finalize a deal. If an agreement is not reached, Democrats have threatened to move a yearlong continuing resolution that would fund the government at current levels, although it is unclear whether they would have the votes to pass the measure.

Members of Congress returned this week after midterm elections delivered results surprising both political parties. With President Joe Biden’s approval ratings hovering in the mid-40% range and inflation as the top issue for a plurality of voters, there was widespread expectation that the Republican party would easily regain the majority in the House of Representatives and possibly the Senate.

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Originally published on November 8, 2022, by the NAIOP E-Newsletter. 

While most of the political establishment in the nation’s capital is focused on the midterm congressional elections, federal agency staff are still moving forward on developing regulations from legislation enacted this year. The U.S. Department of the Treasury and the Internal Revenue Service last Friday issued their Priority Guidance Plan for 2022-2023, detailing their top regulatory priorities for the next year.

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Originally published on October 18, 2022, by NAIOP.

NAIOP and its real estate industry allies last week provided suggestions on the Revitalizing Downtowns Act, legislation that would create a new tax credit to facilitate the conversion of older office buildings into multifamily housing structures. The bill would provide a 20% tax credit for expenses in converting a building that is at least 25 years old to multifamily housing, provided that at least 20% of the units are reserved for affordable housing. In a coalition letter to sponsors of the legislation, the real estate groups suggest expanding the category of properties eligible for the credit and ensuring real estate investment trusts can utilize the incentive, among other things.

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Originally published on October 4, 2022, by NAIOP.

Last Friday, the House passed a stopgap funding bill – sending it for President Joe Biden’s signature only hours before a government shutdown would have taken effect – before lawmakers left to campaign for the November midterm elections. The Senate had passed the Continuing Resolution (CR) days prior, after Senator Joe Manchin (D-WV) agreed to remove controversial energy project permitting legislation that had been part of his agreement with Senate Majority Leader Chuck Schumer (D-NY) to get his support for passage of the Inflation Reduction Act passed in August.

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Originally published on September 27, 2022 by NAIOP Source E-Newslettter.

Last Friday in Pittsburgh, House Republicans, led by House Minority Leader Kevin McCarthy (R-CA), presented their “Commitment to America,” a broad outline of the direction House Republicans would take if they regained the majority in the House of Representatives after the November congressional midterm elections. The outline reflects more detailed proposals made by various policy task forces established by McCarthy to produce a policy agenda in advance of the midterms.

 

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