The National Multifamily Housing Council brought up a bill that was submitted to the House and Senate last year but is probably too late to be implemented.
The Revitalizing Downtowns Act, also known as S.2511 in the Senate and H.4759 in the House, was presented by Sen. Debbie Stabenow (D-MI) and Rep. Jimmy Gomez (D-CA) at the end of July 2021.
If the bill had been passed, it would have offered a tax credit for repurposing outdated office buildings. For approved office conversions, developers would have been permitted to deduct 20% of their conversion-related costs.
Prior to the alteration, the building would have needed to be in use for at least 25 years. A space could be converted by a developer or owner for “residential, retail, or other commercial use,” subject to a number of restrictio
ns. For instance, 20% or more of the building’s units have to be rent-restricted and only open to those with incomes that are 80% or lower than the median for the area. A state or municipal government agreement might have included a building as well.
The bell was referred to a committee in both chambers. Together with a group of business allies, NMHC claimed to have written to Congress in support of the incentive and to suggest some changes, such as allowing REIT participation, extending the incentive beyond office buildings, and allowing states to use tax-exempt Private Activity Bonds to further reduce financing costs. It could also be a good idea to forbid the conversion of historic apartment buildings into other types of commercial property from receiving such a credit.
The core concept is excellent. Particularly in the US, there is a severe lack of housing in many areas. The costs of conversion are substantial. It takes time for old structures that were originally constructed as offices or for any other purpose to be converted into homes or, probably, any other kind of property. If major blocks of the converted units are low-income housing, as would seem only acceptable, finances, especially in times of high rates, might prevent a conversion from being profitable. The building of more housing, which is sorely needed, might be encouraged via tax incentives.
However, NMHC acknowledges that there is little probability of this occurring. In light of the upcoming midterm elections, authorities are reluctant to adopt positions that could harm their chances of winning reelection. Additionally, the National Defense Authorization Act and a hefty budget measure to avoid a partial federal government shutdown are mentioned by Politico.
That still leaves a ton of things that were started but never finished. It’s unlikely that something that didn’t attract enough attention to warrant a hearing will now receive a blaze of attention.
Given that, CRE experts might encourage their elected officials to think about this in the upcoming year. Some suggestions are resubmitted each year. There are some of those that do eventually pass.
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