What IREM Is Watching in Today’s Shifting Regulatory Environment

Property owners are leaning heavily on their property managers to stay abreast of what’s next in the shifting regulatory market. And while recent and suggested actions from the Biden Administration have garnered some attention, according to Chip Watts, CPM, CCIM, the item looming largest is a familiar one.

Rent control “is probably the biggest thing we’re keeping an eye on,” says the immediate past president of IREM (Institute of Real Estate Management) and president of Watts Realty Co., Inc., AMO in Birmingham, Alabama. Spurred on in part by pandemic migration patterns, interest in these regulations has expanded beyond the usual suspects, and is now being discussed in states like Florida, where strong in-migration has spurred the municipalities of Orlando, Miami, Tampa and St. Petersburg to consider the measure.

But such regulations can have the opposite effect on housing affordability, notes Watts. “When you look at St. Paul, Minnesota, they continue to experience the negative ramifications of rent control after passing a ballot measure in 2021. Housing permits for new projects declined by 80% after that. So there’s data indicating rental control may be killing affordable housing, and we’re keeping a close eye on that.”

Other legislation that’s top of mind for IREM and property managers more generally includes just-cause evictions, the Safe Banking Act (which would allow banks to provide financial services to cannabis businesses), and the Affordable Housing Act, a reform project that would encourage more affordable housing construction throughout the country.

IREM, an affiliate of the NAR (National Association of REALTORS), is also closely watching President Biden’s ambitious plan to address the nation’s housing shortfall. Specifically, Watts says, both organizations are encouraging Congress to expand and improve existing financing options at the federal level, including construction-to-permanent loans, promoting the use of state, local, and tribal government COVID-19 funds to expand housing supply, and reforms to the low-income housing tax credits and home investment partnership programs. The Biden package would also provide tax credits for low-income housing rehab, requiring those homes to be sold to owner-occupants instead of investors through the Neighborhood Homes Investment Act.

Watts says IREM is watching the Unlocking Possibilities program, which was included in last year’s House reconciliation bill and would have established a $1.5 billion competitive grant program. The initiative would initiate reforms around housing supply grants and reduce roadblocks to affordable housing, complementing the $10 billion in grants for localities included in the 2023 budget.

“How that will be administered is our concern, and we want to take a look at that,” he notes. “But we often believe states and localities have needless barriers to affordable housing development, and we think there’s perhaps an opportunity to reform that as well.”

Also being closely tracked is the Biden Administration’s stance on 1031 exchanges, according to Watts, particularly following the Build Back Better program’s provision to repeal the deferral of gains greater than $500,000. Watts points to a recent Ernst & Young study showing that 1031 exchanges added $55.3 billion to the US GDP and supported 568,000 jobs. The study also found that like-kind exchanges generated $7.8 billion in state and local taxes in 2021.

Ultimately, Watts says, IREM actively encourages its members to be involved in local government and to keep a close eye on legislation at all levels, using the organization’s bill tracker as a guide.

“Every state and municipality has different regulations and different ways of doing things,” he says. “How they do it in Seattle is different than in New York City or Branson, MO. For managers to most effectively serve owners, they have to start by paying attention to what’s happening in their local communities.”