Biden Tax Proposal Would Squeeze Apartment-Building Owners

Biden Tax Proposal Would Squeeze Apartment-Building Owners

The Biden administration’s plan to limit a longstanding property-tax break could disrupt the business of investing in apartment buildings, discouraging both amateur and professional investors who helped fuel record multifamily sales.

The tax treatment enables investors to defer capital-gains taxes if they invest profits from a real-estate sale into another property. It is used to buy and sell most types of real estate, but it has been a primary source of capital for apartment-building investors. Multifamily sales enjoyed their biggest year ever in 2019, notching more than $184 billion of properties sold.

Karlin Conklin, principal of Investors Management Group, a company that purchases and renovates aging apartment complexes, said about one-third of the capital that her firm raises for acquisitions comes from these like-kind transactions, known as 1031 exchanges. Owing capital-gains taxes could mean less investment in existing affordable housing, she said.

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