Rural and tribal communities also benefit from the new legislation. OBBA includes provisions that favor affordable housing development in rural and tribal areas, such as a 30% basis boost for eligible projects, providing opportunities in regions where development can be more challenging.
Making the NMTC permanent and adding focus to rural and tribal communities increases the areas of impact and allows for a greater swath of the country to garner investment for much-needed affordability, with the hope of having an impact on large-scale community projects.
OBBA is not without its critics, and there are concerns that certain OBBA provisions could negatively affect renters, particularly those with lower incomes. For instance, the bill aims to restrict cities and states from regulating algorithm-driven rent-setting or automated tenant screening processes, which, according to some research, may harm renters.
OBBA also eliminates several energy-efficient incentives and clean energy tax credits. Some analysts believe this could increase the cost of new homes and potentially lead builders to cancel projects, exacerbating the housing shortage. Climate change affects property performance, and energy efficiency is needed for rent/utility cost stabilization and grid impact. Some states may double down on their own incentives for awarding tax credits to deals that go above and beyond the standard scope.
Because it is projected to increase the federal deficit, OBBA may also indirectly affect housing affordability. An increased federal deficit can lead to higher interest rates, impacting long-term affordability for lower- and middle-income families.
Further, rollbacks of environmental regulations continue at the federal and state levels (vis-à-vis NEPA, CEQA, FFRMS, etc.), but as recent severe weather events indicate, people, property and communities as a whole remain susceptible to catastrophic losses.
So while federal and state governments look to cut red tape and promote development, insurance companies will likely look to safeguard against casualties and property losses by enforcing stricter guidance by way of higher rates for indemnity.
At Partner, we remain focused on assessing environmental and climate-related risk. Many of our clients are requesting Construction, Occupancy, Protection, and Exposure (COPE) data collection along with their Property Condition Assessments. COPE data is used by insurers to assess climate-related risk during insurance underwriting. This, along with Property Resilience Assessments, can support insurability and resiliency.
At the end of the day, our nation’s affordable housing crisis remains front and center, and OBBA certainly addresses barriers to financial feasibility and regulatory compliance that have historically stymied development. However, responsibility for safeguarding commercial real estate assets remains