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Housing experts, industry insiders, as well as members of congress and cabinet officials gathered to discuss policies aimed towards providing additional rental stock housing forAmericans. One of the topics is wrapped around the hopes of lowering the overall costs of housing. Due to the current increase in Americans choosing apartments as their primary housing, NMHC estimates that this will create a $1.3 trillion dollar positive impact on our economy and over 12.3 million jobs within the industry. More supply means lower costs to renters.
Numerous participants spoke to the fact that there is currently a huge need to expand land supply. It is expected that over the next 12 years, 75 million adults, ranging in age 18-45 will enter the rental market and the majority will come from adults 45 plus.
Amongst the topics discussed are the challenges arising from the costs associated with the regulations stifling the construction of rental properties. NMHC, Katlin Daniels will release a study that shows that 32% of the cost to build new rental housing is a direct result of regulations. Such as, expanding local government fees, overlapping, long environmental studies and significant OSHA burdens. The study will also reflect that affordable housing initiatives are causing an estimated 8% increase in housing costs. Kaitlin Daniels, goes on to quote, “these costs are major impediments to providing sensible housing solutions to rental residents.”
Another topic of concern was the California ballot initiative to roll back current laws in order to keep market rates for rents in place. If the ballot initiative is successful, these new statues would put rent control measures in place throughout the State of California. Dr. Ben Carson, Secretary of Housing and Urban Development said,“rent controls don’t work. The most challenging rental markets in America are San Francisco and New York City, the two most heavily rent controlled areas of the country. More supply, not restrictive rental rates, are the answer.”
Jamie Pope, Multi-Housing Tax Specialist for Engineered Tax Services, Inc., attended and said, “the demand for more affordable, quality housing is prevalent throughout America. Finding initiatives to help lower the costs for renters and providing additional supply is always the first step.”
Engineered Tax Services (ETS) participated at the National Multi-Family Housing Council Research Forum and continued its educational outreach on how tax efficiency in real estate ownership helps create jobs, and better housing for all Americans.
The Forum gathered some of the best minds in the multi-family housing space to discuss a variety of topics critical for all stakeholders in this all-important housing sector.
Over 130 million Americans, or more than one-third of all people living in the U.S., reside in multi-family housing. This is housing described as having four units or more of living spaces per building.
The headline takeaway from the topics at the forum is multi-family housing, in all sectors of the country, now mostly mirrors the New York City experience over the past 40 years.
Due to high land costs, restrictive zoning ordinances, and tight labor markets, only the most expensive, highest margin properties, have been constructed in New York City over those years, and this trend is now occurring nationwide.
This seems to be the experience for communities across the country regardless of region. The same dynamic is also at play in single-family housing as no “starter” homes are being developed on a large scale.
This means a great squeeze in taking place in many cities as fewer new units are brought to market, thus increasing rental rates across all spectrums.
More dollars are needed today to reverse this troubling trend. ETS participated to help educate those represented on tax efficiency strategies their clients are using successfully to support more diverse housing needs.
Dr. Mark Eppli of Marquette University reviewed his report “Explaining the Puzzle of High Apartment Returns”, which brought many of these availability issues to bare.
Other topics such as reviving Rust Belt Cities, by John Austin of the University of Michigan Brookings Institute showed how the cities and areas benefiting from new, high tech job growth, were thriving. However, those communities that had lost their anchor employers, were suffering population outflow.
Reports about the Southeast United States told a similar story as to how communities with good growth in high paying jobs, continued to see new construction but mostly with higher-end developments.
The new tax law was discussed and the general theme is this new law will help develop more housing by giving developers better tools by which to expense projects.
Tax Reform expert and ETS CEO and Founder, Julio Gonzalez, fought hard during last year’s tax debate to see these much-needed reforms were implemented into law. Already developers are seeing the benefits of these important changes by bringing more dollars and enthusiasm into the multi-family space.
Areas where Mr. Gonzalez stressed changes, such as better depreciation time frames and bonus depreciation, are making a dramatic impact. Most experts at the Forum agreed that the bonus depreciation alone could provide up to 10% of the projects overall costs in real cash tax savings in year one of ownership. More dollars available for development means more jobs and better housing for Americans.
The Gonzalez Family Office is dedicated to a mission of helping to create jobs that are sustainable and well paying. Construction, architecture, engineering, finance, all help fulfill those twin goals. All are the essence of successful real estate projects.
Representing ETS at the Forum was Director of Business Development, Jamie Pope. “This was an important forum as it presented timely, informative insight into the nation’s all-important multi-housing sector. This type of housing shelters over 130 million Americans daily, and as our countries population continues to grow, the need for more quality housing will grow as well. More dollars generated by better tax results means more jobs and better housing for everyone,” said Mr. Pope.
ETS helps create more investment dollars for developers and building owners by helping investors become more tax efficient. More tax efficiency means fewer taxes paid thus increasing cash flow which leads to more needed housing units.
In addition to new units, ETS core work helps find every available federal, state, and local tax dollar available through real estate investing. The work also helps identify energy savings for structures during new construction or the remodeling of existing housing stock.
The added benefits of immediate expensing during remodels, repairs and maintenance, may save substantial dollars by preventing overpayment of taxes.
Forum attendees were interested in the discussion points made by ETS regarding the new Opportunity Zones, these give favorable capital gains tax treatment to certain types of investments in approved low-income areas.
While investors await more guidance from Treasury, the Opportunity Zones will allow investors to sell investments with current capital gains, receive tax deferral of those gains today, and if held for at least 10 years, take those gains and any gained in the new investment, tax-free.
These Zone investments will be a great alternative to the current section 1031 investments of today. This will mean substantially more dollars available to place in new business or real estate located in the designated areas.
These all mean more development which will provide more jobs and more quality housing across our country.
The benefit of ETS tax strategies were apparent at the Forum as many participants spoke of how they had used the core tax strategies of the companies to enhance their ability to provide housing for Americans.
The Forum also delved into new and better housing for aging Baby Boomers as well as student housing. All areas identified in presentations and workshops as needing solutions. ETS strategies help in these types of housing as well.
To slow the trend of only high-end housing development occurring, all parties will seek strategies and solutions that help diversify the types of housing by price and preference being built. ETS has solutions that work in meeting the needs of all groups. For more information, please call (800) 236-6519.