The $3.5T Senate Infrastructure Bill: Real Estate Implications
The $3.5T Senate Infrastructure Bill: Real Estate Implications
News
September 2021
Federal lawmakers are working through the details on proposed tax reforms that will help pay for the $3.5 trillion spending plan. The spending plan incudes billions of dollars to create more options for affordable housing, a growing need in our nation.
Reforms include increases to the corporate tax rate, capital gains taxes, and a 3-percentage-point surtax on individuals making more than $5 million a year. Proposals also include these new ideas:
- Changes to 1031 Exchanges—Named for IRS Code Section 1031, a 1031 exchange allows real estate investors to defer capital gains by swapping one investment for another to defer capital gains. Investors can shift proceeds from a sold home into a new property if they are like kind and meet the time limits set forth in the code. Biden has proposed eliminating the tax break for gains over $500k. While there has been no mention by the Ways and Means Committee of limiting 1031’s, nothing is off the table yet.
- Grants for Zoning Reform—Biden’s Unlocking Possibilities Program creates $4.5B in grants to local municipalities that enact zoning laws to reduce barriers to housing and affordability and curb segregation and displacement. In many cities across the US, zoning is exclusionary and limits opportunities for working poor and people of color to find affordable housing in better neighborhoods. This program has been included in the budget reconciliation by the House Committee on Finance.
- Alternative Housing Models—The Committee on Financial Services proposed $500mm to help create or maintain community land trusts and shared-equity programs. CLT’s are proven models that allow communities to control land and development to create lasting community assets and shared equity homeownership opportunities. Types of projects may include community green spaces, affordable rental and homeownership projects, and commercial community spaces. In the homeownership model, CLT’s sells homes to low- and moderate-income people and restricts future sales pricing to maintain affordability. For more on land trusts check out our blog here.
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