Rental property management firms and landlords should be aware of the effect developing government policy may have on the multifamily sector. According to Apartment Finance Today, government tax code reforms may negatively impact the industry.
With lawmakers and government officials struggling to cut spending and find new revenues to resolve the federal budget deficit and fuel major expenditures, the low-income housing tax credit (LIHTC) is a potential target. The LIHTC has already been mentioned more than once, the source notes, despite its contribution to the creation of more than 2.4 million units of rental housing.
Because it is a relatively large tax expenditure, the program may be allowed to expire when its deadline arrives in 2013. The National Multi Housing Council and other industry experts are working to have it made permanent, however, since it has been so beneficial.
The way carried interest and business interest deductions are treated by the government may also change, the source notes. Another factor is the potential for different tax treatment of partnerships, which are common in the multifamily sector. If they become more expensive, the industry may change in response.