For the first time in years, real estate has a shot at substantially changing the federal policies governing the sector and its sister industries.

As Congress continues to wade through budget proposals for the year, pros on both sides of the political spectrum are desperately seeking ways to stimulate the sputtering U.S. economy. And any measure that does not cause a significant impact on tax revenue is getting close scrutiny.

By some estimates, real estate contributes more than 12 percent to the nation's gross domestic product, which means that energizing real estate can lead to broader economic growth.

Since January, 2001, says the Mortgage Bankers Association of America (MBA) the industry added 25,300 jobs, bringing the total real estate industry employment level to a record 1.56 million. Coupled with the number of new construction jobs, the overall real estate industry employs more than 8.5 million people, according to MBA.

In addition, says the association, an estimated 12 million people bought a home with a mortgage in 2001 or refinanced their current mortgage. Total loan activity amounted to $1.8 trillion dollars. Through that refinancing process, the real estate finance industry generated an estimated $45 billion in consumer spending.

This week the MBA launched its lobbying effort to enact a pro-real estate economic agenda. The organization claims that its suggestions would pump $11.8 billion into the American economy and create 55,000 jobs in the first year. Over five years, agenda items would generate $59.2 billion and create 275,000 jobs, according to the association.

"Our proposals offer real economic benefits for consumers, businesses and government at a critical time," said James Murphy, chairman for MBA. "We support efforts by President Bush and Congress to develop an economic stimulus package and urge Washington to consider the vital role real estate finance can play in the economic recovery effort."

On the commercial side, MBA suggests a number of measures, several of which have been held up in Congress for years. Many of these proposals have been considered favorably by both parties, yet have failed to make the final cut in past budgets. A few were opposed by the Clinton administration. In all, the organization claims that these measures would drive $5.3 billion in new investment over the next five years.

First, MBA wants to shorten the recovery period for leasehold improvements to 10 years or less. The organization also wants to make recent reforms to the tax treatment of brownfields cleanup costs permanent, which could lead to the clean-up of 8,000 additional sites. Neither of these proposals would require new spending.

More expensive to Uncle Sam would be a proposed cut in the capital gains tax rate on gains associated with depreciation recapture for real estate.

The remainder of these proposals relate to housing, where the impact from September's terrorist attacks have already created negative financial results for consumers and companies alike. In fact, the Housing Market Index calculated by the National Association of Home Builders (NAHB) dropped 8 points in early October. The decline -- from 56 to 48 -- is the largest single-month decrease since NAHB started compiling the index in 1985.

"Like the rest of the economy, the housing market is clearly showing the effects of the September 11 attack on America," said Bruce Smith, president of NAHB and a home builder from Walnut Creek, Calif. "In a supplement to the monthly survey, 56 percent of the builders polled said that new home sales had declined in the wake of the terrorist attacks. The primary reasons that they cited were lower consumer confidence, a weaker economy and job market, and the declining stock market."

MBA suggests that the Federal Housing Administration (FHA) permanently change the way it calculates down payments, which could save homebuyers an average of $1,500. The organization also suggests that FHA be allowed to insure adjustable rate mortgages, which would make home ownership accessible to an additional 40,000 families.

"Housing is one of only a few sectors of the economy that is still strong," said Andrew Woodward, former MBA president. "To keep housing on that path and to help strengthen the economy, we will ask Congress and the administration to include these proposals in an economic stimulus package. Helping more people buy homes helps America."

Additional affordable rental housing could be brought into the marketplace with the help of government reforms, MBA claims. For example, the organization suggests that Congress eliminate the multi-family housing insurance premium increase that adds unnecessary costs to building affordable rental housing.

These detailed proposals don't carry the glamour of tax rebate checks or large-scale industry bailouts. They do, however, now have a real chance of succeeding for maybe the first time in history. If big real estate bands together to push these and similar pro-growth measures, there's no telling what positive effects it could have on the industry in the coming years.

For more articles by Lesley Hensell, please press here.

Published: October 19, 2001

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Lesley Hensell covers commercial real estate and financial issues for Realty Times. Based outside of Dallas, Lesley works with high-tech and real estate clients as an independent marketing and public relations consultant. She also writes for several publications, including the Dallas Morning News. E-mail Lesley at: lhensell@earthlink.net