Impact of $1.2 Trillion Infrastructure Bill on Commercial Real Estate

The November 8, 2021, Monday Market Update is considered breaking news here at Beyond Commercial as its impact will be far-reaching and sweeping. The once $2.6 trillion infrastructure spending bill passed pared down to a $1.2 trillion bipartisan “hard” infrastructure bill. 

Here are my insights on what’s good and not good for business and commercial real estate:

What’s good?

  1. To me, like-kind 1031 exchanges remaining is the biggest win for real estate!  I spoke with our most frequently used intermediary and I was told “It’s bananas!”  With the previous uncertainty, there’s incredible pent-up demand as many people did not want to transact and later had a surprise liability.
  2. The other adverse tax proposals were eliminated from the bill.  The final bill contains no capital gains tax increases, no change in step-up basis, no tax on unrealized capital gains, no increased estate tax, no carried-interest provisions, and no 199A limits.
  3. Within the bill, a $150 billion investment in affordable housing provides funding boosts to public housing and rental assistance.  The plan would also create more than one million new affordable rental and single-family homes and invest in down-payment assistance. For those developers in this space, this should come as good news.

What’s not so good?

  1. The increased construction spending on infrastructure would increase the demand for materials and labor which might drive up costs for commercial real estate projects.
  2. The plan does not mention State and Local Tax (SALT) deduction relief, which can impact businesses within high-tax states.  The SALT deduction is a way for people, especially in states where income, sales, and property taxes are high, to escape double-paying on taxes they’ve already paid for like healthcare, education, and transportation.
  3. For broadband, businesses and individuals would benefit from “symmetrical” upload and download speeds.  “In essence, building a 100/20 Mbps infrastructure can be done with existing cable infrastructure, the kind already operated by companies such as Comcast and Charter, as well as with wireless.” If the bill had increased the “upload requirement to 100 Mbps—and requir[ed] 100/100 Mbps symmetrical services— [which] can only be done with the deployment of fiber infrastructure” that could have better situated us for the “future of internet demand.”