Contact Us
News

NAA Launches Grass-Roots Campaign, Calls On Lawmakers To Keep CRE Impact In Mind During Tax Reform

The country is on the verge of its first major tax overhaul in 30 years. Both the White House and Congress have submitted proposals to make sweeping changes to tax policy that will impact corporations and individuals alike.

In preparation for this overhaul, the National Apartment Association and the National Multifamily Housing Council launched a national grass-roots campaign Monday, mobilizing apartment industry players — from frontline employees to owners — to reach out to lawmakers about the potential effects tax reform could have on commercial real estate, and multifamily in particular.

Placeholder

The NAA and NMHC are calling for smart policy changes that will not cause pain to ripple through the industry like the 1986 Tax Reform Act did.

NAA president and CEO Robert Pinnegar said the Protect the Lease campaign is pushing thousands of multifamily professionals to advocate for the industry before new policy is enacted. This includes highlighting the benefits of the industry, such as job creation and economic contribution, to lawmakers on the local level.

"One of our big concerns is we don’t want the tax reform process to end up killing us on the other side," Pinnergar said. 

Déjà Vu: 1986 Tax Reform Woes

Placeholder

The 1986 bipartisan tax reform bill, signed by President Ronald Reagan, devastated the real estate industry.

"Some [CRE players] woke up with a hangover; some woke up and couldn’t walk," Pinnergar said. 

The tax code overhaul loosened regulations to such a degree that it led to the Savings & Loans crisis, known as the greatest banking collapse since the 1929 Great Recession, which eventually led to the liquidation of more than 700 savings and loans banks between 1986 and 1995.

The bill made real estate investment less attractive by eliminating the capital tax differential, pulling back on limitation rules and extending the tax write-off period for real property, according to a report from the Institute for Research on the Economics of Taxation.

As a result of the reform, multifamily starts dropped 71% between 1986 and 1991, the value of real estate returns decreased from 88 cents on the dollar to 66 cents, and the value of real estate tax write-offs depressed, IRET reports.

Fearful that a 2017 tax overhaul could have similar negative effects, NAA is mobilizing association members and industry players to highlight the benefits of the multifamily industry and the potential damage an uninformed change in tax codes could cause.

According to NAA stats, the apartment industry supports roughly 12.3 million jobs in the country, contributing $1.3 trillion to the economy. Though Congress has fired the shotgun on tax reform, meeting on May 18 to discuss the possible impact this reform could have on the economy, Pinnergar said it is still early for the association to weigh in on how the proposed reform could impact the industry.

“I think there is going to be more for us to talk about as we get to the point where we finally see a bill. It will be a combo of what the House and the administration wants,” Pinnegar said. “That’s when we can look at it and say how it is going to realistically impact rentals, new development and housing affordability.”

Though there have been many tax reform attempts since the enactment of the 1986 Tax Reform Act, none have stuck