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At our conference this month in Washington, D.C., I was joined by Ken Simonson from the Associated General Contractors of America (AGC) and Jamie Woodwell from the Mortgage Bankers Association (MBA) for a session discussing the political outlook and its implications for real estate. The panelists shared their distinct perspectives on which policy discussions and legislative actions were potentially most consequential for real estate. For Jamie it was tax reform, and for Ken, immigration, given labor shortages throughout the industry. Policy in both areas is extremely important to the industry, and the changes being discussed are fluid, with several proposals currently in each congressional chamber.

Jamie explained the various aspects of the competing tax reform proposals, among which is a change to deducting all expenses immediately, rather than on the current multi-year schedule. That would likely come at a price, however—the removal of the deductibility of business interest. Ken discussed the adverse effects of current labor shortages on contractors and how the AGC is advocating for increased immigration to ease them. A questioner from the audience wanted to know whether the two associations coordinated their lobbying efforts. Both Jamie and Ken said the organizations talk and inform each other of various positions. Sometimes on opposite sides of an issue, they referred to the tax policy that Jamie discussed: Immediate expensing with no business interest deduction might lead to an increase in construction (since costs are immediately taken out); this would benefit AGC members, but could hurt owners. Both associations are in favor of regulatory reform that helps their various businesses, but federal regulations are only part of the problem—state and local regulatory issues are also impediments to undertaking development and construction everywhere.

Ken and Jamie noted that policy uncertainty makes their jobs more challenging, but it hasn't had a dramatic impact on business. Both the AGC and their members are busy with projects. The same is true of the debt markets and MBA members.