Pascrell, Buchanan Introduce Bill to Encourage High-Rise Housing Development
Amid growing shortage, bipartisan tax legislation will aid in growth of needed housing in many markets
WASHINGTON, DC – U.S. Rep. Bill Pascrell, Jr. (D-NJ-09), New Jersey’s only member of the tax-writing House Ways and Means Committee, and Vern Buchanan (R-FL-16) today introduced the Fair Accounting for Condominium Construction Act, legislation to encourage greater housing development in high-population and high density-areas.
“The lack of housing in many states across the country is a worsening existential problem for many markets,” said Rep. Pascrell. “As many cities become magnets for new residents and young professionals, the dearth of available housing is badly stunting needed growth just as so many American metropolises and suburbs are poised to explode. High-density developments are essential to meeting this problem by offering expanded housing options while simultaneously bringing down the costs of infrastructure and other public services and leaving a smaller emission footprint. At this moment in our national life, we must do more to encourage building and my legislation will fix the tax code to do exactly that.”
“The Pascrell-Buchanan legislation will modernize the outdated percentage-of-completion tax accounting rules that discriminate against condominium construction. The bill will reduce the cost of building new housing, especially in high-cost areas where greater density is needed. The Real Estate Roundtable commends the sponsors for introducing a common sense measure that, when enacted, will help expand the nation’s housing supply,” said Jeffrey DeBoer, President and CEO of the Real Estate Roundtable.
Existing federal income tax laws and the Internal Revenue Service discourage high-rise development through more stringent taxation of condominium building by assessing profit as construction progresses based upon the percentage of costs incurred of total costs and the percentage of pre-sold units of total units – instead of at the time of sale. This formula creates massive taxable income where there is no funding available to pay the required taxes as developers do not receive the purchase price until closing.
In 1988, Congress exempted most home construction contracts from the percentage of completion method. Unfortunately, the exemption, as currently written, does not extend to many high-rise buildings. Rep. Pascrell’s legislation would provide for an exclusion from the percentage of completion method for condo construction contract as it did in 1988 for home construction.