The following roundtable session took place during the 1995 IREM Annual Convention in Atlanta.
JPM: How could proposed changes in government policy or laws affect real estate during 1996?
Stephen Barber (Region 12): In our region, the proposed tax law changes, particularly the reduction of capital gains, are seen as a plus. We have inventory that owners would like to sell.
However, with unemployment rates from 3.6 percent in Portland to 7 percent in Anchorage, it is a fairly tight market so we do not expect most government to have much impact.
Paul Dastugue III (Region 5): We also expect capital gains reductions to have significant impact in our region. Our concern is that as these properties are sold, we'll lose our property management accounts. We find that, for strategic reasons, we must become buyers of real estate, so every tax advantage helps.
Craig Cardwell (Region 13): Personally, I think managers have to begin considering this option. If you do not control you own destiny, someone else will control it for you. Companies that sold properties to REITs have lost significant portions of their portfolios under management and are left with underutilized capacities.
We expect that the HUD reinvention will have a negative effect on the multifamily inventory because there are a significant number of subsidized properties in the region. Managers are also concerned about the overall housing affordability issue for those who fall below the safety net.
Patricia Nooney (Region 10): HUD reinvention will affect many managers in our region. There is generally a wait-and-see attitude now, as people do not believe that all of the proposed changes will be implemented. However, we do expect some negative impact.
Laurie Langlois (Region 1): The East Coast has one of the most sizable concentrations of assisted housing in the nation. Therefore, whatever HUD decides can critically affect our e+conomics. However, because many managers in the East were involved in the recent FHA reorganization, we do not expect any real changes from a government agency to take place in less than a year.
On the other hand, HUD's reinvention may also spur some business. We are already seeing the privatization of some public housing in our region. Housing authorities are ill-equipped to manage properties with the decreased subsidizes HUD is already putting into effect, so we anticipate that more of the properties will be put into private hands.
Rent control was recently defeated in Massachusetts, but we have not seen large rent increases as yet. No one is interested in making any rash moves.
Enis Hartz (Region 2): Our region also has a very large concentration of HUD housing, so we are also concerned, but we also feel that privatization offers opportunities. That will be the flip side of what is being taken away.
Victor Ortiz (Region 9): Some people feel that the HUD reinvention will make the bureaucracy easier to deal with.
Scott Gardner (Region 7): We don't fear the HUD reinvention; our thought is, "How much worse can it be?" We see the plan as a real opportunity in restructuring our portfolio and earning additional fees. If Congress can address the recapture of the capital gains issue, we may be able to transfer some properties to new owners.
We are also managing two properties on an experimental basis for the local housing authority, which has worked out very well for us both.
The problem now is that we do not have the housing product, and people are too nervous to build.
Terence Tom (Region 11): Several major metropolitan areas in California have extensive HUD programs, so the HUD reinvention will have a negative impact in our region. The plan also creates a Catch 22 situation for the federal government. If HUD does not give money to residents for rent, owners will not have funds to pay their mortgages, and defaults will increase. Because the federal government insures many of these loans, it will ultimately pay the price. …