U.S. Apartment Sector Likely To Get A Boost From New Tax Plan

Tax benefits of renting vs. buying a home will increase in 29 of the 35 largest U.S. markets—up from just 15 markets before tax reform

The recently enacted U.S. tax reform is poised to benefit the U.S. multifamily investment market, according to a new report from CBRE that analyzes the implications of tax reform on the multifamily sector in the largest 35 U.S. markets.   

“The new tax policy’s raising of the standard deduction, combined with limitations on mortgage interest and state and local tax deductions, will significantly increase the attraction of renting versus buying housing,” said Spencer Levy, CBRE’s Senior Economic Advisor and Head of Research, the Americas. “This could potentially provide a boon to multifamily investors in many markets.”

CBRE’s analysis finds that tax reform, which makes the increased standard deduction of $24,000 for a married couple available to renters as well as homeowners, will significantly benefit renters in most of the country’s largest markets, thereby encouraging renting over homeownership.

Specifically, the report shows the tax benefits of owning a home are now significantly less in 29 of the 35 markets analyzed, up from just 15 markets prior to tax reform. Major markets where the multifamily sector is poised to benefit include Miami, Philadelphia, Chicago, Denver, Seattle and Washington, D.C.

“Overall, tax reform could provide a short-term boost to the U.S. economy by reducing corporate and individual tax rates, encouraging foreign earnings repatriation and incentivizing new capital formation and investment. How much it could stimulate overall economic growth in the long term is uncertain, but specific to the multifamily sector, it’s likely that we will see a boost in the multifamily investment market,” said Mr. Levy.