The Tax Cuts and Jobs Act of 2017: Implications for the US real estate market

Matt Rader
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Matt Rader: M.S. in Real Estate Investment and Finance, Schack School of Real Estate

Corporate Real Estate Journal, 2020, vol. 9, issue 3, 234-255

Abstract: Since the financial crisis of 2008, global monetary and fiscal authorities have implemented policies to help the global economy recover. In addition to quantitative easing programmes, governments have authorised new tax and spending plans intending to increase growth and business activity. In the US, the Tax Cuts and Jobs Act of 2017 (TCJA) was the signature fiscal policy act of newly elected President Donald Trump. Within the TCJA, corporate and individual taxes were lowered and offset somewhat by the removal of homeowner beneficial tax deductions. This paper explores the direct and indirect impact these changes had on the American real estate market, with a focus on homeownership, business conditions and investment. In addition, this paper explores the creation of opportunity zones (OZ) as part of the TCJA. The author finds that the OZ programme has good intentions but lacks proper accountability measurements. If improved, the OZ programme can help alleviate the affordable housing crisis in low-income urban and rural areas. Municipalities should embrace smart density planning to help solve affordable housing issues while taking advantage of historically attractive borrowing rates to fund commensurate infrastructure projects. The author also concludes that the TCJA has propelled asset markets to new highs while having a negative impact on high tax states, creating a demographic shift that has future political implications. Investment capital should be directed at low state and local income tax (SALT) states witnessing high population and job growth.

Keywords: real estate investment; homeownership; tax; SALT; REIT; strategic default; opportunity zones (OZ); affordable housing; smart density; debt; demographics; politics (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:aza:crej00:y:2020:v:9:i:3:p:234-255

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