IREM and CCIM's Big Day on the Hill
Were you viewing the cherry blossoms in DC last week and overheard folks talking about terrorism risk insurance or HUD contracts? You just may have found yourself among over 300 IREM and CCIM Institute members visiting Capitol Hill to discuss commercial real estate concerns with legislators. (The cherry blossoms aren't really that exciting anyway.) The three most important issues:
1) Federally assisted housing
IREM legislative spokesperson, National Association of Realtors’ Megan Booth, tells us that many IREM and CCIM members own or manage Section 8 and elder-care housing. IREM members, in particular, manage 2.1 million units, where there’s been a large decrease in funding, Megan says. Underfunded contracts discourage owners from getting involved in such housing since they don’t receive their subsidies on time, while other owners have been exiting. And developers are having difficulty getting financing for the sector, which will lead to a scarcity in product. According to IREM, there are only 30 units of housing available for every 100 needy families; for FY 2014, the Section 8 program has been underfunded by $1.5B. (Tell that to your kids when they try to complain about their allowance.)
2) Terrorism Risk Insurance Act (TRIA)
After huge insurance costs were incurred after the 9/11 attacks, mortgage insurers started requiring that owners go beyond getting property casualty insurance to terrorism insurance. TRIA expires at the end of the year, and IREM and CCIM are urging Congress to extend the legislation to provide adequate economic protection against terrorism; while TRIA was only designed to provide a bridge to a time when the privates would be able to function again, they haven’t been able to prove that they’ll provide the insurance to owners at an affordable cost, Megan says.
3) Taxes
Activity from America's $5 trillion real estate industry accounts for nearly one-quarter of taxes collected at all levels of government (like income, property, and sales taxes), according to IREM. So commercial real estate is impacted by the way it’s taxed, and IREM and CCIM are focused on three issues, Megan says: depreciation; depreciation recapture; and like-kind exchanges. (Nobody warns you about those in summer camp as a kid.) Proposed changes in these structures would be a big hit to investors and owners, Megan says, so IREM and CCIM wants the US to create a tax system that recognizes inflation and a tax differential in the calculation of capital gains from real estate.
On Wednesday, IREM and CCIM presented US Congressman Steve Stivers (R-OH) with their Legislator of the Year award. (Bookending him are CCIM member Jerry Hall of NAI Ohio Equities and Eugene Burger Management Corp's Lori Burger, IREM president-elect.) It was for his support of major commercial real estate issues, like the Sales Tax Fairness Act; raising the business lending cap for well-capitalized credit unions; legislation to require the SEC to fully assess the economic impact of any regulation (such as the FASB rule) before adopting; and urging the EPA to demonstrate a link between lead hazards and commercial real estate before promoting any rule to regulate properties.
