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Pres. Biden’s first 100 days and its impact on the Boston real estate market

President Joe Biden’s administration on Wednesday unveiled a $1.8 trillion spending plan that would eliminate a “special real estate tax break” for certain Boston real estate investors.

The partial demise of that tax break mentioned briefly as part of the American Families Plan, is just one of several policy initiatives affecting the Boston real estate market that have started to take shape under Biden, some of which fulfill promises he made on the campaign trail.

Boston Real Estate and the 1031 exchanges

That “special tax break” the Biden administration alluded to is known as the 1031 exchange. Also known as like-kind exchanges, the tax break allows Boston real estate investors to defer capital gains taxes by funneling the proceeds from a sold property into a new one. Ultimately, this means investors can defer tax liabilities indefinitely by repeatedly selling properties and rolling the proceeds over.

The American Families Plan, which would help fund access to education and childcare, would eliminate 1031 exchanges in cases where the gains are worth more than $500,000. How will this impact the Boston real estate market, you ask? Only time will tell.

During his campaign, Biden vowed to reform the Trump-era tax incentive aimed at encouraging development in designated “distressed areas.” But the question remains: What specific changes will his administration make?

On the campaign trail, Biden identified a few areas he sought to change, including increasing reporting requirements for investors. He also floated an incentive for Opportunity Zone funds to partner with community organizations to ensure that investments are dedicated to distressed areas.

The key concern with the program is that it has failed to fulfill its goal of infusing investment in low-income communities. The program allowed investors and developers to defer unrealized capital gains by investing in “opportunity funds” that would, in turn, pour money into underserved communities.

Boston Real Estate and Fair housing

Shortly after his inauguration, Biden signed executive orders instructing the secretary of the U.S. Department of Housing and Urban Development to study the effects of the Trump administration’s actions on key fair housing measures. One was the 2015 Affirmatively Further Fair Housing rule, which required local governments that receive federal funds to identify discriminatory housing policies and map out plans to combat them. Trump repealed AFFH last summer.

This month, HUD took the first formal steps to reinstating the AFFH and “disparate impact” rules.

 Real Estate Infrastructure

There is a lot packed into Biden’s $2 trillion infrastructure plan, which not only pledges funds to roads, bridges and public transit, but also proposes changes to zoning laws and the public housing system.

Boston Real Estate and the Bottom Line

Many of Pres. Biden’s programs have merit. My only concern is the price tags on these programs and will it have a positive or negative impact on Boston real estate values.

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