After years of hearing from real estate experts how the Fed puts the squeeze on the industry in down times, we decided to put the theory to the test and surveyed visitors to the site on the question. Interestingly, the jury was split on whether or not Capitol Hill was tougher on CRE than on other industries, with 50% voting yes and 50% voting no.
But that's not to say that the Fed has been any "kinder" to real estate players during the current downturn. While 74% say the government has not cut the industry any breaks, only 26% see a gentler attitude toward real estate.
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Another contributor says it comes down to a matter of need. "If the Federal government needs to start borrowing money again," he says, "it will not help the real estate industry. This tax cut is already a fiasco."While environmental issues were the top sore point in real estate's relationship with Big Government, taxation came in second with 42% of the vote. Interstate property ownership and telecom provider access each garnered 3% of the vote.
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"Double taxation is what keeps the lid on many transactions, by taxing the gain and then taxing the income," writes another participant.
"Often, 100% of a hotel's value is taxed as real estate when in fact there is a large component of that value that is not real estate, but business value," adds another respondent.
Much of the problem, say our respondents, is that the industry is too fragmented to mount a unified campaign. "At least the news media usually report if there is lobbying--without it we are invisible," says one surveyed executive.
"The industry is too fragmented to develop a cohesive voice on all but the most onerous issues," says one writer. "Many of the commercial real estate groups (NAIOP, NAREIT, NAR, and so on) have divergent agendas."
But most of our surveyed visitors disagree with this writer's view on lobbying groups. Some 67% of those polled saw lobbying as helpful, while 27% said it was a waste of time. Some 6% think its harmful.
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Another respondent agrees: "The problem is the local [Austin] city government. They have imposed so many rules and red tape that it is difficult to develop any real estate project. It can take up to two years to get a development approved."
Given the length of time it takes national--or even state--policy to turn around, solutions to the problem of Big Brother watching over real estate are not forthcoming. But if the climate is ever going to change, says one participant, it has to entail government recognition of real estate as big business.
"Real estate law should be drafted on a national level rather than on the state level," he comments. This will "foster interstate competition, simplify the code and cut down on unnecessary fees to practitioners who need multiple licenses." Until then, whether it be on a national, state, or local level, our survey participants tell us that government will continue to nip at the heels of commercial real estate.
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John Salustri
John Salustri has covered the commercial real estate industry for nearly 25 years. He was the founding editor of GlobeSt.com, and is a four-time recipient of the Excellence in Journalism award from the National Association of Real Estate Editors.
