Tax increases proposed as part of the Biden administration’s infrastructure plan would negatively affect real estate costs, compounding the nation’s housing affordability crisis, according to senior living and real estate trade associations.
The American Seniors Housing Association signed on to a recent statement to the House Committee on Ways and Means with the National Association of Home Builders and several other real estate-related trade associations criticizing proposed tax reforms to pay for measures in the American Jobs Plan and the American Families Plan.
In the joint statement, the associations urged policymakers “not to erode long standing rules that support job creation, capital formation and productive risk taking.” The group said it was focusing on changes that would “directly and negatively” affect the real estate industry — which is still struggling to emerge from the pandemic — by increasing costs amid the nation’s housing affordability crisis.
ASHA President David Schless said that all of the tax issues would affect aspects of senior housing. Proposals related to carried interest, for example, would directly affect those in the industry that use real estate partnerships to raise capital for new senior housing developments. Other elements, such as a hike in the long-term capital gains tax rate, could have a significant effect on older adults considering moving to continuing care retirement communities, also known as life plan communities, he said.
“ASHA has long been involved in an array of real estate-based tax advocacy, going back to our founding 30 years ago by the National Multifamily Housing Council,” Schless told McKnight’s Senior Living.
The 17 associations signing the statement credited the American Jobs Plan and American Families Plan with offering “credible initiatives” to address some of the nation’s most pressing needs, including affordable housing. And although they said they support “aggressive steps” to finance infrastructure needs, they added that some of the tax proposals accompanying the plans would reduce economic activity and opportunities and would be counterproductive to the initiatives’ goals.
Several tax proposals in the two plans would reduce real estate investment and diminish opportunities for startup businesses and those less advantaged, the associations said. Those proposals include limiting taxpayers’ ability to defer gain that is reinvested in like-kind property, doubling the tax rate on long-term capital gains, limiting capital gains treatment to invested cash while disregarding other forms of risk taken, and making death a taxable event at lower levels of income.
“Collectively, these proposals will undermine the very goals the administration seeks to achieve by reducing opportunities and economic rewards for cash-poor business owners,” the statement read. It also indicated that the proposals would undercut the tax base in localities that rely on real estate taxes to finance schools and first responders. “Moreover, they will diminish the incentive for private investment of capital in riskier projects, such as affordable housing and redevelopment in struggling communities,” the associations said.
The group said it supports a “holistic approach” to expand and modernize the nation’s aging infrastructure and increase the supply of affordable housing. The associations suggested that policymakers enact incentives to streamline permitting and regulatory processes, enhance the low-income housing tax credit and establish a middle-income housing tax credit.
They also said they support encouraging public-private partnerships, updating the real estate investment trust rules to allow REITs to invest in and operate more types of infrastructure investments, modernizing some tax rules and considering potential tax incentives to spur reinvestment in properties.
“Tax reforms should be undertaken with caution, with a focus foremost on supporting the nascent economic and jobs recovery, and the capital investment, that will drive our economic growth for years to come,” the statement said.
