We recently discussed how the longest government shutdown in history is affecting commercial real estate ‒ but there’s more to the story.
Though we can assume the shutdown will eventually end, CRE professionals worry the divisive politics behind it could have a more significant long-term impact on commercial real estate.
“High-profile topics, such as the investigations into the Trump Administration, may overshadow issues of importance to commercial real estate,” Morningstar Credit Ratings’ Caitlin Veno wrote after the “Politics As Unusual” panel at the CREFC annual conference in Miami last week.
The extent of the current political division leaves CREFC’s head of government relations Marty Schuh worried “we’ll miss the opportunity to be a constructive Congress” until next year.
And that could leave important CRE-related programs at risk.
Among those are the National Flood Insurance Program, which aims to reduce the impact of flooding on private and public structures and expires May 31. Flood season starts when the weather warms up in the spring.
There were over 1,600 significant flood events in the U.S. in 2018, 59 percent of which were flash flood-related, a recent report found. Hurricanes Florence and Michael, last year’s most destructive hurricanes, put billions of dollars in commercial real estate financing at risk in the Carolinas and Florida.
Another federal program that could affect commercial real estate is the Terrorism Risk Insurance Act, which is in effect until the end of 2020 and establishes a compensation system for insured losses resulting from acts of terrorism.
Some experts say not funding these programs would be a major disruption to the real estate industry.
The Community Reinvestment Act, which encourages financial institutions to help meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods, is also being left in limbo. The regulation hasn’t been updated since it was enacted in 1977.
CrediFi tracks low-income housing properties and the financing behind them. Find out more about our CRE finance platform.
The Office of the Comptroller of the Currency is considering an overhaul of the ways in which banks’ lending and investment in relevant neighborhoods is determined, a proposal opposed by some banks and community groups.
Though Schuh called this period “a rare moment where we have both sides, who should be at odds, saying, ‘Let’s do this,’” others wondered whether Democrats and Republicans would agree on how to proceed.
“How can we feel optimistic about anything when they’re struggling to keep the lights on?” Isaac Boltansky, director of policy research at Compass Point Research & Trading, asked at CREFC.