The American Jobs Act, also referred to as the American Jobs Plan, is a $2 trillion act proposed by President Joe Biden to help revitalize manufacturing, create quality jobs, rebuild infrastructure, and provide housing and commercial real estate across the country. The bill, if passed, could provide new opportunities for real estate developers and investors. Here's what real estate investors need to know.
Affordable housing takes precedence
A huge part of Biden's bill is the $213 billion set aside specifically to produce, preserve, and retrofit more than 2 million affordable, sustainable places to live. The Act would build upon several existing tax credits, grants, and rental assistance programs to help spur mixed-income housing and affordable housing units while eliminating state and local exclusionary zoning laws that often prohibit low-income tenants from accessing affordable housing in diverse neighborhoods. Changing zoning restrictions means developers and rehabbers may be able to complete new projects with less resistance or restrictions, especially as it relates to affordable housing.
The Act would also create the Neighborhood Homes Investment Act (NHIA), which offers investors and developers $20 billion worth of tax credits over the next five years for developing or rehabbing 500,000 single-family homes specifically for low- and middle-income earners. Investors able to utilize these tax credits in addition to block grant programs, the Weatherization Assistance Program, and home and commercial efficiency tax credits could benefit while helping to add to the necessary and desperately needed supply of affordable housing.
Manufacturing moves home
The American Jobs Act also puts a large focus on returning manufacturing and research and development (R&D) jobs back to the United States. The American Jobs Act allocates $50 billion to create a new office at the Department of Commerce that will monitor domestic industrial operations and funding investments, in addition to $31 billion in programs that give small manufacturing businesses access to credit, venture capital, and R&D money.
For real estate investors, that means there will be an even higher demand for industrial real estate, such as warehouses and distribution and manufacturing facilities. With it is an increase in demand for related services, including workforce housing and data centers.
Clean energy leads the way
The president has advocated for the transition away from fossil fuels toward more renewable and clean energy sources. This initiative will be seen across all sectors of the economy, including real estate. This means real estate investors who utilize certain sustainable development or green certifications in their real estate projects could be able to utilize the 48C tax credit program for their efforts. Additionally, there will be financing programs designed specifically to support debt and equity investments for manufacturing, particularly with the use of clean energy.
Corporations would see big tax changes
The American Jobs Act would also aim to make some major changes to the current tax laws, changing the current corporate tax rate to 28%, in addition to eliminating current foreign tax law incentives that promote certain corporations for sheltering some of their income abroad for tax purposes. These changes wouldn't really impact small-to-midsize investors but would have a big impact on larger real estate corporations, including real estate investment trusts (REITs) and real estate developers.
The Millionacres bottom line
The passing of new bills has become a routine part of an administration change. Just as the American Tax Cut and Jobs Act was passed by President Trump, Joe Biden has proposed The American Jobs Act, which focuses on the major initiatives behind his campaign.
Investors who follow the incentives and priorities of the current president are likely to be met with varying tax incentives and credits that can help improve a project's profitability. Right now, the bill has yet to be passed, but there is a strong chance many elements of this bill will be enacted. Understanding the priorities of the current president is the best way to determine where opportunity lies over the next several years.