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Tax Reform and the Rental Market

April 13, 2017 | John Salustri

“Tax reform has the capacity to fundamentally reshape the multifamily industry.” So says Doug Bibby, president of the National Multifamily Housing Association, in a recent column for The Hill.

With tax reform approaching the on-deck circle in the President’s agenda, Bibby calls for a “package that promotes economic growth and investment in rental housing without unfairly burdening apartment owners and renters.” This, he says, will not only spur growth but will also “help close America’s housing gap.”

While a reduction in corporate tax is a good thing, he points to the dominance of flow-through entities such as LLCs and S-Corps in the industry. “Congress must not reduce corporate tax rates at the expense of flow-through entities,” he writes. “Additionally, Congress should protect the real estate investment trust tax structure that also drives investment into the multifamily sector.”

And he calls as well for the protection of like-kind exchanges, which “enable property owners to defer capital gains tax if . . . they exchange it for another comparable property.” In so doing, they maintain a level of interest in the market on the part of owners. “Tax reform should recognize the current value of like-kind exchanges and retain incentives to invest in real estate.”

Also dampening both the pace of development and investment are proposals to extend the 27.5-year depreciation period. Bibby writes that it would also drop real estate values and stifle “the industry's role in job creation. Tax reform should reflect the critical role that cost recovery rules play in real estate investment.”

Bibby’s call to action, beyond the obvious of getting in touch with lawmakers—a major grassroots effort being mounted this year by IREM—is to remember the impact of past so-called reform measures, particularly the 1986 act. “Real estate values tumbled in the wake of the act,” he writes, “as passive investors could no longer deduct real estate losses against income earned from their primary jobs.” As he points out in the piece’s headline: “The multifamily industry lost in ’86. That can’t happen again.”

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About the Author John Salustri is editor-in-chief of Salustri Content Solutions, Inc., a consultancy focused on enhancing the web and print content of clients around the nation. He is a regular contributor to JPM Magazine and a frequent blogger for IREM’s website. Prior to launching SCS, John was founding editor of, the industry’s premier real estate news website, where he managed the daily output of 25 international reporters, and prior to that, he was editor of Real Estate Forum Magazine. John is a four-time winner of the National Association of Real Estate Editors’ Award for Excellence in Journalism.

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