By the time you read this, all of the midterm elections will have been decided and the playing field will be set for the 114th Congress. When members return in January, the GOP will be in firm control of both the House and Senate. Last month I looked back at some of the key factors that contributed to the Republican victory. Now it’s time to look forward to what the new management in Congress could mean for the apartment industry in 2015 and 2016.
While party control did not change in the House of Representatives, there is one big change to highlight. Rep. Paul Ryan (R-Wis.) leaves his current post as Chairman of the Budget Committee to take the helm of the Ways and Means Committee, a post he has long sought. He succeeds retiring Rep. Dave Camp (R-Mich.) who led the Committee for the past four years. A wonk’s politician, Mr. Ryan enjoys diving deep into complicated policy subjects and has signaled that he would like to slay the dragon that is tax reform during his tenure. That is a steep hill to climb anytime, but could be especially challenging in a presidential election cycle.
On tax reform, outgoing Chairman Camp was not afraid to take on established constituencies in the tax code which was reflected in the bold reform proposal he released in 2013. As previously discussed in this column, that proposal had both positive and negative elements for real estate and almost every other sector of the economy. As a result, it proceeded no further and was not even considered in Committee. What the draft did do, however, is lay on the table a number of proposals for raising revenue that remain as options for future tax reform deliberations.
It’s difficult to tell at this point if Mr. Ryan will want to be as aggressive as his predecessor, but we do know that he too is unafraid of taking on the tough issues (see his budget reform proposal from 2012). Entitlement reform is also a priority for him, so it will be interesting to see if he tries to work in some of those elements as well.
On the Senate side a familiar face returns to the throne of the Banking Committee. Sen. Richard Shelby (R-Ala.) is Chairman once again after a hiatus for several years. Importantly for apartment industry concerns, Mr. Shelby is a veteran of the GSE wars of a decade ago. That reform effort was unsuccessful and made essentially moot in 2008 when both enterprises were placed in conservatorship by the federal government. Still, reform remains a priority for many in Congress not only to address Fannie Mae and Freddie Mac, but also the future role overall of the federal government in the housing finance system
Mr. Shelby’s opposite on the House Financial Services Committee, Rep. Jeb Hensarling (R-Texas), is committed to a total wind-down of the entities and an exit for the federal government from the housing market. You will recall that his bill to achieve that end, the Protecting American Taxpayers and Homeowners (or PATH) Act, made it out of committee but generated so much concern that it stalled and never received a vote of the full House. While Mr. Shelby was a strong critic of the GSEs during previous reform deliberations, it’s uncertain if he is in the same place as Mr. Hensarling on eliminating the federal role in housing finance altogether. Regardless, with Republicans leading both committees of jurisdiction on this issue, the negotiating dynamic will be much different than in the current Congress.
Finally, there is a change in leadership on the Senate Environment and Public Works or EPW Committee. This is significant in light of the many environmental proposals coming out of the Administration, specifically from the Environmental Protection Agency (EPA). Senator Jim Inhofe (R-Okla.) will take over from Senator Barbara Boxer (D-Calif.) a staunch environmental advocate. To say Mr. Inhofe is skeptical of environmental regulation is an understatement. It’s safe to say that EPA representatives should plan to spend a lot of time in front of the EPW Committee to answer questions about proposed regulations in a whole host of areas. To the extent those proposals add to the regulatory burden of the apartment industry, the bright light of hearings could be impactful.
Lest we forget, despite the changes above, the President still holds the veto pen and has an entire federal bureaucracy at his disposal. As evidenced by his recent actions on immigration, he will use that power to move policy on his own if he does not view Congress as a willing partner. Apartment industry advocacy could turn more sharply towards regulations than in the past. Time will tell on that score and on how more willing the President is to negotiate with Republicans in Congress.
I close with a reminder: Make sure to be in Washington, D.C., on March 17-18 to advocate for the industry with your members of Congress during the NAA Capitol Conference.
Thanks for reading. As usual, the opinions expressed here are my own so feel free to call me out on them. You can do that by emailing me.
Talk to you next month.