One of the Biden Administration’s top priorities is getting the president’s $2.3 trillion infrastructure plan through Congress in its entirety. This would be a significant accomplishment for the president, but it could turn out to be an even bigger win for the country’s real estate investors.
If $2 trillion in infrastructure spending is music to investors’ ears, it would be symphonic.
The plan is still a long way from completion, and a recently released Republican counteroffer would significantly diminish its impact.
A deal that keeps even a portion of the current infrastructure plan in place, on the other hand, could result in a real estate price boom — and big money for real estate investors. The most expensive item in Biden’s infrastructure bill is the $621 billion he wants to spend on roads, bridges, and various forms of public transportation.
Better roads and bridges would allow businesses to reach out to customers more easily. This could result in new businesses – and new jobs – springing up in certain parts of the country, driving up housing demand. New modes of public transportation frequently have the same effect.
Biden’s proposal also includes $213 billion for the construction, renovation, and retrofitting of 2 million homes and housing units, with the upgrades paid for through grant programs. The president is also pushing for the passage of the Neighborhood Homes Investment Act, which would provide developers and investors with $20 billion in tax credits to build or renovate approximately 500,000 owner-occupied homes.
According to Corey Burr of TTR Sotheby’s International Realty, Biden’s plan will benefit anyone who wants to make money by investing in real estate “if the program actually targets worthwhile improvements to airports, roads, bridges, railroads, pipelines, water security, the electric grid, and internet.”
When they say “location, location, location,” they don’t just mean the amenities a property is close to now, but also what it might be close to in the future — a new highway, a new rail yard, a new university campus. To get the ball rolling on the evolution of a neighborhood or an entire small city, infrastructure spending is sometimes required.
And it’s not just a matter of new parks, schools, or subway stations attracting higher-paying tenants. Infrastructure spending is also significant in commercial real estate.
According to a joint study conducted by the Urban Land Institute and EY, traditional infrastructure spending on utilities, transportation, and telecommunications is the most important factor influencing commercial real estate and development decisions.
Any increase in commercial real estate activity caused by infrastructure spending would benefit residential investors as well. The same increased economic activity that drives up commercial real estate demand should also drive up job growth, which often drives up both housing demand and rent values.
Burr believes that “investing in actual infrastructure for America should be welcomed by all real estate owners and investors.”
To pay for all this infrastructure investment, Biden has suggested returning the top Individual tax rates were raised to 39.6 percent, corporate tax rates were raised from 21 percent to 28 percent, and capital gains tax rates were nearly doubled from 20 percent to 39.6 percent.
These actions would generate more than $1 trillion in revenue over time, but they would almost certainly be vehemently opposed by the country’s wealthiest citizens.
They will also be unappealing to Congress. Biden already had trouble getting the COVID-19 aid bill passed. Getting both the House and Senate to agree on another $2.3 trillion in infrastructure spending may necessitate nothing short of a miracle. Recognizing that the road ahead would be difficult, the president previously stated that he would be willing to accept $1.7 trillion in infrastructure funding. He then stated that he would consider signing a $1 trillion infrastructure bill.
Republicans in the Senate recently proposed a counteroffer of $928 billion, which is more than $70 billion less than Biden’s minimum. There may be a long way to go before anyone, investors or otherwise, benefits from this bill.
While Washington works on a solution for the country’s infrastructure, why not optimize your investment strategy?