Tax Plan Will Encourage More Multifamily Activity

All signs indicated that multifamily activity will remain strong in 2018. Despite being so late in the cycle, Mark Ventre, SVP at Stepp Commercial, says that the new tax plan and low—although slowly rising—interest rates will fuel market activity throughout the year. We sat down with Ventre to talk about the Los Angeles multifamily market and what we can expect this year.

GlobeSt.com: How will the new tax plan impact the multifamily market in Los Angeles? 

Mark Ventre: The tax plan will have a positive impact on the multifamily industry for various reasons.  Owners of pass-through entities such as LLCs and LLPs, private equity funds, and S Corporations will be able to claim a 20% deduction on their income.  Additionally, the depreciation schedule has been shortened from 27.5 years to 25 years.  Indirectly but not at all less consequential, is how it will affect the single-family market, especially in high property value locations like Los Angeles. There is a new $10,000 limit on state and local property tax deductions, and the interest expense deduction has been reduced to the first $750,000 of mortgage debt (and an elimination entirely on the interest deduction on home equity loans).  And, because the standard deduction has doubled, there is less of an incentive to itemize, which is one of the main benefits of home ownership.  All these reasons could cause would-be homeowners to continue renting.