Congress Had a Great Idea That It Absolutely Won’t Pass This Session

In the annals of wishful thoughts of what could have been, the National Multifamily Housing Council brought up a bill filed in the House and Senate last year, which is likely out of time.

Known as S.2511 in the Senate and H.4759 in the House, the Revitalizing Downtowns Act was introduced by Sen. Debbie Stabenow (D-MI) and Rep. Jimmy Gomez (D-CA) at the end of July 2021.

The act, had it passed, would have provided a tax credit to convert older office buildings into new uses. Developers would have been able to deduct 20% of qualified conversions expenditures for qualified office conversions.

The building would have had to be in service for a minimum of 25 years before the conversion. A developer or owner could turn a space into “residential, retail, or other commercial use.” In the case of a residential conversion, there were several conditions. For example, 20% or more of the building’s units had to be rent restricted and available only to people whose income is 80% or less of the area median. A building could also have been written into a state or local government agreement.

In both houses, the bell went to committee. NMHC said that, with a coalition of industry partners, sent a letter to Congress in support and to suggest some changes, like allowing REITs to take part, expanding the incentive beyond office buildings, and enabling states to use tax-exempt Private Activity Bonds to cut financing costs even further. It might also be wise to prohibit such a credit from being extended to the conversion of older apartment buildings into some other sort of commercial property.

The basic idea is terrific. Many parts of the US are terribly short of housing, in particular. Conversion costs are high. Old buildings that started as office or some other sort of construction aren’t quick transformation into housing, or probably any other type of property. Finances, especially at times of high rates, might make a conversion unprofitable if significant blocks of units would be low-income housing, as seems only reasonable. Tax credits might make the difference and encourage more creation of housing that is desperately needed.

But, as NMHC admits, there’s little chance of this happening. Midterm elections are in a few weeks, officials are wary of taking stances at this point that might throw off a re-election bid. Plus, as Politico noted, there are at least a big spending bill to prevent a partial federal government shutdown and the National Defense Authorization Act.

That leaves a heck of a lot of things that never got done and won’t. Something that didn’t receive enough attention to get a hearing is unlikely to catch a blaze of attention now.

That said, CRE professionals might prod their representatives into considering this next year. Some proposals come back year after year. Of those, there is a portion that do eventually get passed.