Multifamily organizations look for tax changes

Commercial real estate taxation may change.

The current tax situation around the country may have a negative effect on both property management companies and their tenants. Some industry members recently spoke with Congress to work toward making changes to help improve conditions.

The National Apartment Association and the National Multi Housing Count had a representative speak with Congress to make some changes to the tax law that included reform that will not damage small business taxation, as well as keep a full deduction for business interest.

Both organizations were represented by Moran & Company, who testified on their behalf.  The firm noted that it is important for financial risks to be offset by carried interest.

"Like many other small businesses, the apartment industry has a considerable stake in tax reform," said Thomas Moran, chairman and managing partner of Moran & Company. "In addition, we provide homes for millions of Americans covering the entire socioeconomic spectrum. An estimated 300,000 to 400,000 units a year must be built to meet expected demand; yet just 158,000 apartments were delivered in 2012 – not enough to even replace the units lost every year to demolition and obsolescence."

Energy-efficiency was another topic that was important to the organizations regarding further tax reform. One specific aspect of this was to change the 179D Energy Efficient Commercial Buildings Tax Deduction, as there is a problem for some property management companies to be able to take advantage of the incentive for their properties.

Other issues that affected taxation for the multifamily market included the current existence of the Low-Income Housing Tax Credit. The firm stressed that this needs to remain a part of the market, in order to help continue to aid some tenants.

Commercial growth may continue to improve
While taxation may be altered in the coming months, the level of growth in the market may ramp up. The commercial real estate transaction volume may rise to $310 billion this year, according to a report completed jointly between the Urban Land Institute and Ernst & Young. This figure would be $20 billion improved from 2012's level. It may continue to rise to as much as $340 billion next year. While this may jump to $360 billion.

Commercial mortgage-back securities could also jump this year. The figure is projected to reach $70 billion this year, the report added. This would be 50 percent improved from 2012.

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