A wide-ranging $2.3 trillion infrastructure plan released by President Joe Biden Wednesday that includes $213 billion to address affordable housing issues for low- and middle-income renters and buyers, upgrades the nation’s public housing stock and seeks to remove barriers to development received wide approval from multifamily executives who said housing has historically helped lead the country out of recession.
But some also expressed concern about how to pay for the sweeping proposals that range from $621 billion on improvements for roads, bridges, railways, ports, airports, public transit and the electric grid to $400 billion to expand home care services for the elderly and disabled and increase wages for those who care for them. Among other proposals it also calls for $300 billion for manufacturing, $180 billion for research and development, $100 billion to build new public schools and upgrade facilities including ventilation systems, $12 billion for community colleges and $25 billion for child care facilities.
Biden said most of the funding for the biggest federal spending plan in decades would come from raising the corporate income tax from 21 percent to 28 percent and increasing the global minimum tax on U.S. corporations to 21 percent. He also pledged not to tax people making less than $400,000. But multifamily industry leaders worry that the administration could turn to tax-related incentives used by multifamily and commercial real estate investors. During the campaign, Biden had proposed eliminating the 1031 exchange and raising capital gains taxes for individuals with incomes higher than $1 million.
“Transaction volume would drop. It would really alter the industry,” Andre Soroudi, director of acquisitions for the West Coast, CGI Real Estate Investment strategies, said of Biden’s earlier proposal to take away the 1031 exchange. “We work with a lot of private investors that want a 1031.”
JLL Chief Economist Ryan Severino said the administration may have been looking for parts of the tax code that are the least counterproductive to economic growth. “Marginally raising corporate taxes and marginally raising taxes on wealthy individuals is less disruptive.”
Cindy Chetti, senior vice president of government affairs at the National Multifamily Housing Council, said she did not see any mention of those tax incentives in the administration fact sheet. “We will always continue to watch out for other tax provisions that could be detrimental to the industry,” she said.
But overall, Chetti said she was “encouraged and excited” by Biden’s proposals. “We’ve continued to believe that housing is infrastructure and should be included. We’re encouraged that this has $213 billion in funds aimed at redevelopment and incentivizes localities to address housing needs. It’s also about breaking down some of the barriers and that’s one of our key messages.”
