When the Senate passed a $1 trillion infrastructure bill with bipartisan support last month, the Real Estate Roundtable applauded, with the trade group’s new chairman, John Fish, calling it a “once-in-a-generation opportunity to rebuild and reimagine the buildings of tomorrow.”
But the infrastructure package — a vast array of funding streams including $110 billion for roads and bridges, $65 billion for power grids, $65 billion for broadband, $55 billion for water and sewer projects and $39 billion for public transit — has since been caught in a tug-of-war between progressive and moderate Democrats.
House progressives won’t support the infrastructure bill without an agreement in place for a $3.5 trillion budget bill that addresses social needs such as health care, child care and education. The hefty cost of the measure is to be funded by raising taxes on corporations, high-income earners and wealthy investors.
House moderates say they can’t support that so-called reconciliation bill in its current form because it’s too expensive. They demand that a deal be reached with the Senate before Sept. 27 when the House would vote on the bill. With at least two Senate Democrats voicing opposition to the $3.5 trillion bill, the fate of the smaller infrastructure bill is up in the air.
Fish, chairman and CEO of Suffolk Construction, in July took the reins of the Washington, D.C.–based organization. It consists of the nation’s industry leaders from publicly held and privately owned firms in real estate and adjacent sectors, including landlords, developers and lenders, as well as the heads of 19 national real estate trade associations. He joined the Real Estate Roundtable’s president and CEO, Jeffrey DeBoer, to discuss the situation with The Real Deal via Zoom. The interview below is condensed and edited for brevity and clarity.
TRD: Is the Real Estate Roundtable lobbying to get the infrastructure bill to the finish line?
DeBoer: We are. We’re enthused about the infrastructure bill. We think it’s very important and very much needed, long overdue. I think everyone agrees that what is needed immediately is to work on our infrastructure, repairing roads, bridges, inter-city rail, broadband, water systems, and all of these things are definitely needed. And then, a lot of these other issues [addressed in the reconciliation bill] are certainly wanted. And we want to work with policymakers to make sure that that second bill is not unintentionally damaging to the economy.
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Fish: In our industry, and the economy as a whole, what we really look for is predictability. When you take a step back and think about the confluence of the different issues that we put on our plate in the month of September and coming into October, it could lead to a lot of uncertainty. At any time you have uncertainty, that scares capital away, and also causes a sense of hesitation for people to invest. If we’re able to pass this trillion dollar infrastructure bill, the impact that will have on many, many communities throughout the nation will be substantial. At the end of the day, these are investments that the government is going to be sponsoring, that creates economic activity, job creation, and a sense of equality across our communities of America.
DeBoer: In the bipartisan bill, there is a part that would encourage federal help to retrofit existing buildings to be more energy efficient. Seventy five percent of the buildings that are standing today were built in the last century. If we want to get bang for the buck to reduce energy consumption in real estate, it has to be targeted at existing buildings, and policies need to be accommodative for these buildings. It’s not a one-size-fits-all thing. So we’re very positive and active on that front as well.
Fish: Forty percent of all greenhouse gas emissions come from buildings. So when we think about the debate going on in Washington, this issue of climate change from the real estate perspective is very, very important. We think we can play a significant role in policy in this particular area. And the idea of the government incentivizing the real estate development community, property owners, to upgrade their buildings to lower that 40 percent figure, to me, is something that could be extremely well received, not just nationally, but globally.
TRD: What are your concerns over the reconciliation package other than that its passage is now entangled with the infrastructure bill?
DeBoer: Our concern really is that there might be some unintended consequences. And there are readily apparent provisions — such as eliminating the 1031 like-kind exchange — which affects about 1 in 5 commercial transactions in the country — by itself would have a deleterious effect on real estate and investment. And then on top of that, the capital gain rate and corporate tax rates are potentially going up, and other changes in the estate tax, and so forth. And a variety of things that just together create an environment that would cause investors and business people to slow down and pause.
Fish: We really need to understand exactly what will transpire when we make these decisions, and how do we actually pay for it in a thoughtful way, and try to, I would argue, mirror the way that we approached the [infrastructure bill] in a bipartisan way. Let’s not look at [the reconciliation bill] without building consensus because the debate that took place in the infrastructure bill led to some very, very good compromises. At the end of the day, compromise is an inherently democratic process, which we all support.