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The Build Back Better Framework: What Is It, and How Will it Affect Real Estate?

A row of windows in a multi-family apartment building

We are on the verge of a major shift in housing affordability with the "Build Back Better" plan, and perhaps other prosperity measures to enable a more thriving middle-class thanks to it. However, what does all this talk about measures mean for those looking to diversify their portfolios?

In this article, we will talk about what the “Build Back Better Framework” looks like, and how it will affect real estate investors.

How the “Build Back Better Framework” Could Affect Real Estate Investors

What is the “Build Back Better Framework”?

Using this framework, the United States hopes to meet its climate goals, create millions of good-paying jobs, enable more Americans to participate in and remain in the workforce, and grow the economy from the bottom up and middle out. This will be accomplished by:

  • Investments in transforming caregiving support and services for children;
  • Creating America's largest effort in history to fight climate change;
  • Expanding affordable health care to millions of Americans;
  • Being the largest effort ever made to reduce costs and strengthen the middle class.

While the framework talks in-depth about average citizens, it also discusses affordable housing initiatives, taxes, and other key factors that could impact your bottom line.

What the Framework Means for Real Estate Investors

The “Build Back Better Framework” includes historic levels of investment in new and affordable housing while sparing real estate investments the worst taxes.

It includes hard-fought NAR priorities such as down-payment assistance and affordable housing investments while sparing the most feared taxes from the real estate industry.

Though support for the framework and the bipartisan bill's passage is far from guaranteed, the President's announcement of this framework shows that momentum is building for getting the bill signed into law.

Investors should look towards preparing for this influx of homebuyers, and eager renters who will soon be entering the market for single-family homes, condos, and apartments.

Making Affordable Housing History

A person looking down at a welcome mat that says

This framework calls for a $150 billion investment in affordable housing, a priority of NAR's advocacy efforts over the past year.

Funding for public housing and rental assistance would increase under the agreement. More than one million new affordable single-family homes would also be built under the plan, as well as down-payment assistance.

According to the White House, the down-payment assistance under the plan would allow "hundreds of thousands of first-time homebuyers to build wealth." The benefits will be especially great for lower-income households, millennials, and households of color.

For millions of Americans to experience prosperity, affordable housing is critical. Closing the racial homeownership gap and addressing income inequality truly require this investment. These initiatives make homeownership finally attainable for first-generation citizens and first-time home buyers.

As part of the housing section of the framework agreement, funding will be provided for the following programs:

  • Affordable public housing
  • The Housing Trust Fund
  • HOME
  • The down-payment assistance program
  • Accommodation vouchers
  • MDA (Minority Business Development Agency)

Investments in Real Estate Will Be Spared by Tax Provisions

A new tax will be imposed on high-income individuals and businesses to pay for the plan, but the most feared taxes on real estate investments have been exempted.

Some of the earlier tax proposals floated could have devastated the real estate sector, which makes up nearly one-fifth of the entire economy.

This framework has none of the following imposed upon it:

  • No 1031 like-kind exchange limits
  • No capital gains tax increases
  • No change in step-up basis
  • No tax on unrealized capital gains
  • No increased estate tax
  • No carried-interest provisions
  • No 199A limits

This means that tax provisions put forward in this current framework are favorable for consumers, property owners, and the real estate economy as a whole.

Tax deductions for state and local taxes (SALT) are not mentioned in the plan. Congress, however, still supports a SALT cap increase, and a group of bipartisan House members continues to push for a solution.

However, according to the NAR, Congressional leadership can address SALT through an amendment once a bill is under formal debate, and the house will not let down its guard when it comes to SALT and is hoping for a quick resolution.

Key Takeaways

While a raging tide of change is on the horizon, the real estate market is, for the most part, spared from any big waves. In fact, if the “Build Back Better Framework” goes through, we could potentially see an even more thriving market for investors in the coming years.

A stronger middle-class is the backbone of a thriving economy. When they can make enough to participate in the economy rather than simply survive, this offers opportunities for market growth, more stability in uncertain times, less risk of mortgage defaults, missed rental payments or condo association fees, and a more competitive market with a lower vacancy rate.

Should I Invest In Multi-Family Properties in Burlington, Vermont?

From the first-time duplex buyer to the seasoned investor with a large portfolio of rental properties, our team will work closely with you to optimize the process of buying or selling investment properties. Our unique understanding of the local city and state ordinances combined with a network of experienced lenders, attorneys, local contractors, and professional trades puts our clients in the best possible position to reach their real estate goals.     

Since 1998, we’ve helped thousands of local clients build wealth through real estate investing. The Lipkin Audette Team understands that a successful investment strategy needs to be designed to fit each individual’s unique set of needs and goals.

If you’d like to speak with our team about how to get started or what the current market value of your property/portfolio might be, please contact us today!