Understanding the Real Estate Provisions of Tax Reform: Motivation and Impact

Capital investment tax provisions have been changed numerous times in the last decade, with depreciation tax lives shortened in 1981 and lengthened ever since and capital gains taxation reduced in 1978 and 1981 and now increased. The first part of this paper analyzes these changes and attributes a large part of them, including the 1986 Tax Act, to changes in inflation: tax depreciation schedules and capital gains taxation that look reasonable when the tax depreciation base is being eroded at ten percent a year and an overwhelming share of capital gains is pure inflation take on a different appearance when inflation is only four percent. The remainder of the paper critiques the typical project model used to compute impacts of tax changes on real estate and report simulation results using a modified model.

Real Estate and the Tax Reform Act of 1986

In contrast to the conventional wisdom, real estate activity in the aggregate is not disfavored by the 1986 Tax Act. Within the broad aggregate, however, widely different impacts are to be expected. Regular rental and commercial activity will be slightly disfavored, while historic and old rehabilitation activity will be greatly disfavored. In contrast, owner- occupied housing, far and away the largest component of real estate, is favored, both directly by an interest rate decline and indirectly owing to the increase in rents. Low-income rental housing may be the most favored of all real estate activities. The rent increase for residential properties will be 10 to 15 percent with our assumption of a percentage point decline in interest rates. For commercial properties, the expected rent increase is 5 to 10 percent. The market value decline, which will be greater the longer and further investors think rents will be below the new equilibrium, is unlikely to exceed 4 percent in fast growth markets, even if substantial excess capacity currently exists. In no-growth markets with substantial excess capacity, market values could decline by as much as 8 percent from already depressed levels. Average housing costs will decrease slightly for households with incomes below about $60,000, but increase by 5 percent for those with incomes above twice this level. With the projected increase in rents, homeownership should rise for all income classes, but especially for those with income under$60,000. The aggregate home ownership rate is projected to increase by three percentage points in the long run in response to the Tax Act. The new passive loss limitations are likely to lower significantly the values of recent loss-motivated partnership deals and of properties in areas where the economics have turned sour (vacancy rates have risen sharply). The limitations should have little impact on new construction and market rents, however. Reduced depreciation write-offs, lower interest rates, and higher rents all act to lower expected passive losses. Moreover, financing can be restructured to include equity-kickers or less debt generally at little loss of value.

Lillebonne – Hôtel de ville, quartier Saint-Denis

Identifiant de l'opération archéologique : 594 Date de l'opération : 1996 (SD) ; 1994 (SD) Inventeur(s) : Follain Éric (SRA) Les limites nord de l’agglomération antique de Juliobona ont pu être précisées sur une emprise d’un hectare. Lors de la création du nouvel hôtel de ville, à l’occasion d’un diagnostic (hiver 1994), de sondages complémentaires (hiver 1994) et enfin d’une surveillance de terrassement (printemps 1996), seules les parties sud et est de l’assiette du projet ont révélé la pré..

Rouen – Historial Jeanne-d’Arc

Pendant les aménagements du sous-sol de l’Historial Jeanne-d’Arc un sondage ouvert en 2013 avait permis de repérer, dans un niveau de déblais d’incendie antique, un bloc erratique. En le remontant à la surface en 2014, son examen a montré que l’on se trouvait face à un élément architectonique très intéressant. Ce bloc n’est pas associé à une structure proche et les éléments antiques découverts dans le secteur – vestiges d’habitat en torchis et colombages – sont totalement étrangers à l’interp..

Le Bec-Hellouin – L’Abbaye : logis abbatial

L’abbaye Notre-Dame du Bec est fondée au xie s. par un simple chevalier, Herluin. L’arrivée de Lanfranc de Pavie comme prieur, en 1039, et la création de l’École du Bec contribuent grandement à la notoriété du monastère qui voit arriver dons et élèves issus des élites de la Normandie. Bénéficiant de nombreuses donations, l’abbaye voit le nombre de ses possessions atteindre une telle importance que l’on disait à son propos De quelque côté que le vent vente, l’abbaye du Bec a rente. La guerre d..

Le Havre – Fort de Tourneville

Le fort de Tourneville, érigé vers le milieu du xixe s., a permis à la place du Havre de résister aux Prussiens de 1870 à 1871. Il est ensuite converti en caserne pour des régiments d’infanterie de 1890 à 1976. Dominant Le Havre, il est actuellement propriété de la ville et abrite les archives municipales et le siège d’un certain nombre d’associations. Les travaux, débutés en 2012 pour la réalisation d’une salle de concert et de studios d’enregistrement, ont permis, lors du déblaiement de la ..

Life Career Development Services for Deaf College Students

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In Search of Empirical Evidence that Links Rent and User Cost

Most models of the rental housing market assume a close linkage between the level of residential rents and the after-tax user cost of rental housing capital. However, little empirical evidence exists to establish the strength of this linkage or the speed with which rents adjust to changes in user cost or tax policy. This paper develops and estimates an econometric model of the rental housing market in order to shed light on both of these issues. United States annual data for 1964 through 1993 are used to generate two-stage least squares estimates of a four equation structural model. Although the results are generally consistent with expectations and reveal several interesting relationships among the system variables, the estimates fail to identify a strong relationship between rent and user cost. About half of an increase in user cost is ultimately passed along as higher rent. The adjustment process also takes a long time, with only about a third of the long-run effect realized within ten years of a user cost shock. The fundamental reason for this result is that our estimate of the user cost series, based upon widely accepted procedures, is much more volatile than the residential rent series.