Fannie Mae Comments on Impact of Tax Reform on Multifamily Housing

In its most recent Multifamily Market Commentary, Fannie Mae’s Multifamily Economics and Market Group discusses the impact of the Tax Cuts and Jobs Act of 2017 on the multifamily market. While early versions of the legislation contained several proposals that would have dramatically changed the way commercial real estate taxes were implemented, and how investments are financed and structured, the commentary concludes that the most impactful change in the final bill was the lowering of the overall corporate tax rate. Citing analysis from Novogradac & Company, Fannie Mae describes how the lower corporate tax rates diminished the value of the Housing Credit, and will likely lead to a 14 percent decline – or more than 200,000 units – in affordable housing rental home production and preservation. Additionally, the group explored other early proposals in the tax reform process that concerned the sector, particularly the elimination of the tax exemption on Private Activity Bonds, as well as the potential negative impact of the base erosion and anti-abuse tax (BEAT) on the appetite of certain Housing Credit investors.

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