The Biden administration is officially in session. As with all new administrations, this will entail a host of policy changes, major and minute. With respect to real estate and housing, a fair amount of changes have already been signaled by the Biden administration in the publication of the so-called “Biden Plan.”
This Plan, though only a proposal, has a high likelihood of implementation due to the Democrats’ success in the Georgia Senate runoffs and the resultant Democrat Senate and House majority. The budget reconciliation process will allow Democrats to pass key tax and budget reforms with only a 50% majority. Experts are predicting that the process will be used extensively early in Biden’s tenure. [1] Despite this, it is unlikely that the Plan will be implemented entirely as proposed, as it will first have to go through House and Senate approval processes where it will likely meet pushback.
In any case, it is important to stay fully abreast of what the Biden Plan entails for real estate, even if we ultimately end up with a watered down version. Overall, the Biden Plan clearly emphasizes the new administration’s focus on assisting low to mid-income households alongside ‘mom-and-pop’ small landlords. This focus is especially apparent in the Biden Plan’s response to COVID-19, which will ramp up federal relief for those affected by the pandemic.
The Biden Plan proposes a multitude of relief efforts. First, it aims to extend the federal government’s moratorium on evictions and foreclosures to September 30th. This would be a significant relief for hard-hit tenants, property owners and the 9.5% of households reportedly experiencing housing insecurity. [2] Relief will not only come in the form of extra time, but will also include financial provisions. Namely, an additional $30 billion in funding “for emergency rental, energy and water assistance” is in the works. [3] In a similar vein, the Biden Plan has proposed a $400-per-week federal bonus that will be provided to jobless Americans, regardless of their unemployment benefits status. Further, the stimulus provision of $600 will be followed by an additional $1400 direct deposit to qualifying households. [4] These changes will collectively reduce the likelihood of the so-called national eviction crisis. Even more, they will couple well with states’ efforts to extend and expand relief.
That covers the short term intentions of the plan. In the long term, the Biden Plan will keep with its focus on low to mid-income household assistance. It will do so likely by supporting federal assistance programs with increased tax revenue from high-income and wealthy households.
This intention is well documented in the Plan’s many tax policy changes. If implemented, the Biden Plan will “decrease an individual’s federal estate tax exemption amount either to $5 million… or to the pre-Tax Cuts and Jobs Act amount of $3.5 million.” [5] The Plan will also raise the top income tax rate back up to the 39.6% of Obama’s tenure. [6] The minimum qualifying income for the top income tax bracket will be lowered from $518,000 to $400,000.
The Biden administration has also proposed big changes to the estate tax as well. These two changes will occur if the Biden Plan is implemented unchanged. First, the tax rate for estates valued at more than $11.58 million will be raised from 40% to 45%. Second, the exemption will be reduced from $11.58 million to $3.5 million; though, this specific proposal will likely meet Senate challenges, potentially even from Democrats. [7]
As Washington begins the negotiations process, these numbers are likely to be revised and revised again. However, keeping the Biden Plan and the Democratic majority in mind, property owners and tenants alike can begin to prepare for the next four years of real estate policy now.
Sources:
[1] – Allen, David, et al, “2021 Biden Plan Estate Planning Advisory,” The National Law Review, 15 Jan. 2021, https://www.natlawreview.com/article/2021-biden-plan-estate-planning-advisory, acc 22 Jan. 2021.
[2] – Glaze, Tim, “How Biden’s $1.9T stimulus plan impacts housing,” HousingWire, 15 Jan. 2021, https://www.housingwire.com/articles/how-bidens-1-9t-stimulus-plan-impacts-housing/, acc 22 Jan. 2021.
[3] – Ibid.
[4] – Ibid.
[5] – Martel, Eric, “Eight Ways The Biden Tax Plan Could Affect Your Real Estate Business,” Forbes, 13 Jan. 2021, https://www.forbes.com/sites/forbesrealestatecouncil/2021/01/13/eight-ways-the-biden-tax-plan-could-affect-your-real-estate-business/?sh=6830dcfe334c, acc 22 Jan. 2021.
[6] – Ibid.
[7] – Ibid.