The prospect of retaliatory taxes slowing real estate investment and harming the nation’s housing supply, including senior living, has prompted the American Seniors Housing Association to join real estate partners in voicing their concerns.
ASHA joined a coalition of real estate organizations in a June 12 letter to Senate Finance Committee members expressing concerns about the “significant” impact retaliatory taxes would have on real estate investment and the cost of capital.
Retaliatory tax measures in the House-passed budget could have “significant negative, unintended consequences,” including higher mortgage rates, reduced housing supply, decreased investment in urban and rural communities, fewer jobs and slower economic growth. The coalition urged the Senate to exempt non-controlling investments in US real estate to ensure access to foreign capital for real estate investment.
The budget proposal would impose higher tax rates on foreign taxpayers that reside in foreign countries, and it would apply broadly to foreign investment in US real estate. The result, according to the coalition, would be an exodus of foreign real estate investment.
The effects of the retaliatory tax, the coalition said, already are having a “chilling effect” as foreign real estate investors are pausing or delaying potential investments due to the “abrupt policy shift.” The proposed policy also would shift the economic tax burden on to US real estate owners rather than the foreign lenders, as well as “undermine global confidence” in US property markets.
Foreign investments of more than $213 billion in US commercial real estate — including $57 billion in multifamily housing — in the past five years expanded real estate lending capacity and lowered the cost of capital for new real estate projects, spurred construction and economic activity, supporting job growth and boosted local tax revenue to support public services.
“By bridging gaps that domestic sources cannot meet, foreign capital helps out tradesmen and others to work improving US commercial properties, including shopping centers, hotels and senior housing,” the letter read.
Foreign investors will simply redirect their investments elsewhere, resulting in less investment, lower property values and reduced tax revenue for the US Treasury, according to the coalition.