From an Insider: Jeff DeBoer Sees Important Juncture for Real Estate Policy
In his three-plus decades of work in Washington on behalf of real estate and his two-decade tenure as president and CEO of The Real Estate Roundtable, Jeff DeBoer has had a hand in nearly every piece of significant real estate legislation since 1982. Now, with most in the industry once again closely watching developments in the Beltway, DeBoer says previous points in the real estate cycle can provide valuable lessons.
DeBoer is set to moderate a panel entitled "A New Political Order: Domestic and Global Business in the Trump Era" at DLA Piper's Global Real Estate Summit in September. We asked him to preview that discussion and provide some insights on the state of affairs in Washington.
Q: Is there a period in recent years that reminds you of where we currently stand in the real estate cycle?
JD: It does feel similar to the period in 2007-09, not because we're in the same type of negative crisis, but because of the policy opportunities and risks facing the industry in Washington. Similar to the situation we experienced 10 years ago, today I think we're at a juncture of equal importance that has the potential to set the industry on a course for the next several years. The question is whether it will be in a positive or negative direction.
A decade ago, policy decisions were made regarding issues such as distressed loans, restarting the secondary market, encouraging loan workouts and other items that put our industry in a good position to move forward. The question is, will we look back on the policy decisions that may be made now and in the near future as positive or negative for the coming years? At the moment, I don't think we can really know how the current policy debates will conclude except to say they will be consequential to capital flows, taxation and real estate ownership and operation in general.
Q: The panel you're moderating will focus on the shift in power in Washington. A lot can happen in two months, but if the panel were held today, what questions would you be most eager to ask?
JD: I'd ask the panelists how we can bridge the very different points of view in American politics. One-sided approaches to policy making aren't sustainable over a long period of time and typically only create future problems. So the question is, how do leaders bring people together toward bipartisan solutions in this highly polarized environment?
I think it requires leaders willing to recognize that accomplishing 100 percent of what you want to accomplish is not really the best course. Leaders need to step back and recognize that great things can occur without what would be considered 100 percent victories. Leaders in both parties need to be willing to tell those with more extreme points of view in their parties to not be so aggressive.
Going back to 2007-09 – during the Great Recession – there was a recognition that we were in the middle of an economic crisis. Leaders knew that without making some big decisions, the ramifications could be quite severe. The economic problems forced policymakers to come together and attempt bipartisan solutions.
Absent an economic crisis or similar force, the ability to bridge the divergent points of view appears quite difficult in the current climate. That hasn't always been the case – where a crisis was needed to form a common point of view. It's discouraging that we're at that point and while hard to see today I am optimistic that we can find a way forward ... a sort of back to the future in leadership, if you will.
Q: The session you're moderating will focus on whether the GOP can implement a unified vision. Given that they're in control of the White House and Congress, why can that be difficult?
JD: At the moment, it's difficult for either party to advance the policy details needed to implement vision. Generally, each party can agree on headline policy goals, but when they get into the details, they struggle to unify themselves. That's where party leadership can serve an important role.
It's one thing to say, for example, that tax reform is needed to spur economic growth and create jobs – which is the policy goal and vision for the GOP. But implementing that comes down to the details and those details often prove elusive these days.
Q: Are there signals along the way that you watch for? For instance, will the GOP's success or failure at repealing and replacing the Affordable Care Act be a bellwether?
JD: I'd agree with that, to a point. If the party can come to a consensus around healthcare, it would certainly be an indicator that they can unite on a policy goal. On the other hand, if they fail in their healthcare plans, I don't think that necessarily means that their other policy goals are doomed. Failure on healthcare doesn't mean they can't reach consensus on tax reform or infrastructure.
That said, achieving healthcare reform would lower some obstacles for what the GOP wants to do on tax reform, due to budgetary factors. Passage of healthcare puts a thumb on the scale of successful tax reform of some sort.
Q: Are there certain issues real estate executives, and especially your members, are watching most closely?
JD: Healthcare is an issue that touches basically everyone, of course. But real estate executives are probably most focused on tax reform – including individual rates, capital gains and the ability to deduct interest on business debt. Those all relate to how real estate will be developed, financed and transferred.
After that, they're probably most focused on infrastructure. Repairing our existing systems – from roads to mass transit to the electricity grid to the access to the internet – is extremely important. But real estate executives also always strive to look ahead, in terms of trends like driverless cars, on-demand car travel and where millennials are choosing to live. It's clear that we need an infrastructure plan going forward that recognizes that people are changing how they travel and live.
We're also naturally focused on how the economy can become more robust – and where the demand for things like offices, industrial facilities, multifamily units and hotels will be strong in the face of relatively low GDP numbers. The question is, where's the demand going to come from? Where will job growth come from? What kind of policy will be put in place to create jobs and move the economy forward?
But big picture, if we have the right policies, real estate will be just fine.