How Biden's First Executive Orders Will Impact CRE
Newly inaugurated President Joe Biden signed 17 executive orders, memorandums and proclamations on Wednesday afternoon, aiming to set the direction of his administration as well as undo various policies of the previous one.
Two will have particular ramifications in commercial real estate — the extension of the federal eviction moratorium and the U.S.’ re-entry into the Paris Agreement on Climate Change.
Biden further extended the multifamily eviction moratorium, which was enacted by the Centers for Disease Control and Prevention in early fall at the direction of the Trump administration. The original order expired at the end of 2020, but was extended by the second stimulus bill until the end of January. The new order extends the moratoriums on evictions for nonpayment of rent or mortgages until March 31.
The eviction moratorium is aimed at addressing the increasingly serious matter of tenants who cannot pay their rents. More than a quarter — 28% — of U.S. renters are starting the year with unpaid rent bills from previous months, according to a new survey by Apartment List. Rent debt is concentrated among minority renters, and 53% of Black renters are now burdened with unpaid housing bills, according to Apartment List.
“Extending the moratoriums on evictions will not only protect families, but will avoid harm to the housing markets until families can once again resume housing payments,” said Joseph Lynyak, a partner at the law firm Dorsey & Whitney and an expert in regulatory reform.
Not everyone agrees.
“As an attorney representing people in the industry and being an owner of a substantial number of apartment units I find it somewhat unfair — and I understand very well the risk of being thrown out of your apartment — that this government and none of the other [global] governments are asking anyone other than landlords to contribute to the support of their customers,” said Alan Hammer, an attorney and member of the real estate practice at Brach Eichler in New Jersey.
The National Multifamily Housing Council and National Apartment Association issued a joint statement Wednesday night calling the executive order “well-intended” but saying they have “serious concerns” about the eviction moratorium being extended without additional rental relief or other financial assistance.
In September, the NAA joined a lawsuit filed by the New Civil Liberties Alliance challenging the CDC order and the agency’s authority to issue it. The organization had been lobbying for direct rental assistance for months, some of which was eventually included in the second stimulus bill in December. Biden has proposed the American Rescue Plan, which would include further rental assistance as well as unemployment assistance and more stimulus checks. NMHC and NAA’s statement supported that proposal but said even it does not sufficiently address the outstanding rent debt.
Biden will also direct the Departments of Agriculture, Housing and Urban Development, and Veterans Affairs to extend their foreclosure moratoriums for their federally backed mortgages.
“These emergency measures are important,” Biden's top economic adviser, Brian Deese, said on a call with reporters, as reported by CBS on Wednesday. “There are more than 11 million mortgages guaranteed by the VA, Department of Agriculture and HUD that would be extended.”
Biden has also signed an executive order for the U.S. to rejoin the Paris Agreement, a legally binding international treaty on climate change. The U.S. will officially rejoin the global coalition in 30 days. The goal of the agreement is to limit global warming to less than two degrees Celsius compared with pre-industrial levels.
To do this, participating countries must commit to reducing greenhouse gas emissions, stepping up their efforts over time — President Barack Obama pledged to reduce U.S. emissions by 26% to 28% below 2005 levels by 2025. The agreement also provides a framework for developed nations to assist countries that are less developed in taking on the challenge of climate change.
Under the direction of the Trump administration, the U.S. was the first country to withdraw from the accord on Nov. 4, after formally notifying the United Nations a year earlier. Trump said the agreement imposed an unfair economic burden on American workers, businesses and taxpayers.
Gensler principal and Global co-Director of Design Resilience Rives Taylor said the Biden administration’s approach to climate, including rejoining the Paris Agreement, will provide more predictability for developers that are looking to forecast the long-term value of the effort they put into their buildings.
“I think it’s, we have a lot less uncertainty, and we start looking for not only low-hanging fruit, but there may be more aspiration to make greater progress because there's less uncertainty. And that may be the big change,” Taylor said.
But Taylor said even though the Trump administration opted to withdraw from the Paris Agreement, the firm never stopped focusing on carbon neutrality and sustainability in its projects. That interest has been mostly driven by investors and insurers, rather than federal policies.
“Between state leaders, city leaders, including our own [Houston] Mayor [Sylvester] Turner, most of our major clients, our top 100 clients globally, business didn't change. We kept focusing on it,” Taylor said.
Transwestern Director of Sustainability Josh Richards said that rejoining the Paris Agreement is necessary and beneficial to the commercial real estate industry. Like Taylor, Richards pointed to the clout of international investors that often have a vested interest in embracing climate action.
“I know it's something that many of our clients in particular are eagerly doing. They're soliciting, courting some of these international groups, and these investors are getting more and more involved with the transparency side of things, especially when it comes to climate change. Not just because it's a risk factor, but because they want that positive press,” Richards said.
Richards expects that rejoining the Paris Agreement will have some impact on Transwestern’s portfolio, though, at this stage, he is unsure of the extent. It may take the form of new building codes and standards, as well as new offset programs. He also expects an expansion of benchmarking and public reporting requirements.
“I imagine we're not going to be seeing a ton of fines early on. We're going to see a lot of casual or progressive adjustments that really encourage us to take our own initiative,” Richards added.
City of Houston Chief Sustainability Officer Lara Cottingham said that rejoining the Paris Agreement will send a loud and clear signal that the federal government is serious about reducing emissions and moving climate action forward. That will help cities around the U.S. continue to push their own independent climate initiatives.
“There is so much that cities can do. But there's a lot that cities can't do without the support of federal action,” Cottingham said.