Editor’s note: This article has been updated.
President Joe Biden signed the Inflation Reduction Act into law Tuesday, a sweeping climate, health care and tax bill that spares affordable housing investment and other real estate from the most feared new taxes. The $784 billion legislation allows Medicare to negotiate prescription drug prices, invests billions of dollars into clean energy and imposes a 15% minimum tax on corporations with more than $1 billion of earnings. A portion of the revenue raised also will go toward deficit reduction.
But the law excludes an array of tax measures on real estate investment proposed last year. “When discussions began on the original Build Back Better plan, there were nearly a dozen tax changes that could have decimated our efforts to increase the supply of affordable housing,” says Shannon McGahn, NAR’s chief advocacy officer. “After spending more than a year educating lawmakers on these proposals, a bipartisan consensus emerged that they weren’t a good idea, and none of the harmful tax changes made it into the final bill.”
Last year, NAR launched a comprehensive action plan to advocate for affordable housing supply. A study commissioned by NAR showed the U.S. is 5.5 million housing units short and that it could take more than a decade to fill that gap—even with accelerated new construction. “A supply shortage of this magnitude requires an all-of-the-above response,” says NAR President Leslie Rouda Smith. “We are working toward zoning reform, money for new construction, expanded financing options and tax incentives to spur investment, convert unused commercial spaces to residential and increase the supply of construction workers. And our efforts are building consensus that decisive action is needed.”
In March, the White House included a historic funding request for affordable housing in its budget proposal. Then, in May, thousands of REALTORS® descended on Washington, D.C., and hand-delivered to Congress a comprehensive list of actions they could take to address the housing shortage. Also, in May, the Biden administration released a Housing Supply Action Plan. In July, the Treasury Department allowed the use of $350 billion in American Rescue Plan funds for developing, repairing and operating affordable housing units.
“We aren’t just working with Congress and the administration,” McGahn says. “We’re also working with industry partners and agencies on a wide array of initiatives to expand homeownership—such as the Black Homeownership Collaborative’s 3by30 plan to add 3 million net new Black homeowners by 2030.”
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