NAR recently submitted a letter to the House Small Business Committee for a hearing examining the rulemaking effects out of the U.S. Department of Labor. The Department of Labor (DOL) has jurisdiction over employment opportunities for workers across the country and its policies impact all industries, including the professionals in the real estate market. In the letter, NAR advocated for clarity and consistency from policymakers in an effort to minimize disruption and uncertainty around whether a worker is classified as an employee or an independent contractor. The letter also explains the benefits of the bipartisan legislation (H.R. 5419, the “Direct Seller and Real Estate Agent Harmonization Act”) that incorporates the Internal Revenue Code's statutory protection (26 U.S.C. §3508) for qualified real estate professionals as non-employees into the Fair Labor Standards Act (FLSA). DOL is currently undergoing an FLSA rulemaking examining worker classification and NAR has advocated for the same IRC recognition in that regulation.
The Washington Report
October 30, 2023
In This Issue
Community Reinvestment Act
Final Updated CRA Rule Adopted
Housing Supply
White House Announcement on Commercial Conversions
Money Laundering and Terrorist Financing
FinCEN Renews and Expands Geographic Targeting Orders (GTOs)
Worker Classification (independent contractor v. employee)
NAR Advocates for Worker Classification Clarity
Final Updated CRA Rule Adopted
The Federal Reserve (Fed), Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) formally adopted changes to modernize the Community Reinvestment Act (CRA). The new rules include several changes that were championed by NAR as adopted in NAR’s CRA Modernization policy. The new rules must be adopted by January 1st of 2026.
The CRA applies only to depository banks and not mortgage lenders. Banks are evaluated on their ability to meet their CRA obligations each year and it affects their ability to merge as well as media reports and thus their value among other things.
The final rule was developed cooperatively among the three regulators and is less calculation dependent than a draft adopted in 2020 by the OCC before being subsequently rescinded. It was viewed as too complex.
The new rule makes several significant changes that align with NAR policy including:
- Expands the assessment to include banks’ activities nationwide and not just in the areas where they take deposits. This includes online business.
- Looks at retail lending, retail services, community development financing and community development servicing,
- Expands the number of metrics to evaluate performance,
- Updates asset size thresholds for small, intermediate, and large banks to account for changes in the banking industry: (1) small banks: <$600M (from <$376M); (2) intermediate banks: $600M–<$2B (from $376M–$1.503B); and (3) large banks: ≥$2B (from ≥$1.503B), adjusted annually for inflation,
- Utilizes community and market benchmarks that reflect differences in local conditions.
Ken Fears, kfears@nar.realtor, 202-383-1066
Matt Emery, MEmery@nar.realtor, 202-383-1212
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White House Announcement on Commercial Conversions
On Friday, October 27 the White House announced its Action to Create More Affordable Housing by Converting Commercial Properties to Residential Use, building upon its Housing Supply Action Plan released in 2022. The announcement includes new proposals and guidance for states, localities, and developers to repurpose underutilized commercial properties into affordable housing, and highlights existing tax credits and programs that can be leveraged to reduce costs and improve energy efficiency. These include:
- Releasing a Commercial to Residential Federal Resources Guidebook with information on the more than 20 federal programs that can be used to support commercial-to-residential conversions;
- New guidance from the Department of Transportation on lending programs to support transit-oriented development projects which increase affordable housing and reduce emissions;
- Updated guidelines on using the Community Development Block Grant (CDBG) fund to boost housing supply, including converting commercial properties to residential and mixed-use developments;
- Promoting the sale of surplus federal properties that could potentially be redeveloped for residential use;
- A Department of Energy Toolkit on how achieve zero emissions in conversions and using Inflation Reduction Act programs and credits to bring more capital to the conversion;
- Information from the Treasury Department on tax incentives for builders of multifamily housing.
In addition to these actions, the White House is working with states, localities, and the private sector to support this goal, collecting information on resources for commercial conversions, highlighting successful programs, and building policy proposals that can be adopted by localities interested in pursuing such conversions.
NAR has long supported commercial real estate adaptive reuse policies as one way to ease the affordable housing shortage and has discussed this with the White House and policymakers in the administration and Congress. The COVID-19 pandemic created new trends in commercial real estate usage, especially office and retail spaces. The increase in underutilized commercial real estate combined with the great need to develop more housing – especially affordable – in the country presents a unique opportunity, but costs and challenges associated with such projects have kept this solution from taking off. By drawing attention to this proposal and highlighting resources as well as collecting information and bringing together experts at the state and local level, the White House Action is an important step in promoting commercial to residential conversions. In addition to this, NAR supports H.R. 419, the Revitalizing Downtowns Act, which would provide a tax credit for the conversion of certain underutilized office buildings into affordable housing.
Christie DeSanctis, CDeSanctis@nar.realtor, 202-383-1102
Erin Stackley, estackley@nar.realtor, 202-383-1150
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Money Laundering and Terrorist Financing
FinCEN Renews and Expands Geographic Targeting Orders (GTOs)
The Financial Crimes Enforcement Network (FinCEN), a bureau within the Treasury Department, recently announced the renewal and expansion of its Geographic Targeting Orders (GTOs), which impose reporting requirements on U.S. title companies to identify the natural persons behind companies used in non-financed purchased of residential real estate. FinCEN has renewed the GTOs every six months since 2016. The recent GTO is effective beginning October 22, 2023, until April 18, 2024.
The following jurisdictions are covered by the GTO: Boston; Chicago; Dallas-Fort Worth; Houston; Laredo; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; Seattle; Denver; the District of Columbia, Maryland, and Northern Virginia (DMV) area; as well as the City and County of Baltimore, the Counties of Fairfield and Litchfield, Connecticut, and the Hawaiian islands of Honolulu, Maui, Hawaii, and Kauai.
The GTO also expands the covered jurisdictions to also include counties of Bristol, Essex, Norfolk, and Plymouth in Massachusetts; the counties of Hillsborough, Pasco, Pinellas, Manatee, Sarasota, Charlotte, Lee, and Collier in Florida; and the county of Travis in Texas.
Learn more about the current order.
Christie DeSanctis, CDeSanctis@nar.realtor, 202-383-1102
Nia Duggins, nduggins@nar.realtor, 202-383-1085
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Worker Classification (independent contractor v. employee)
NAR Advocates for Worker Classification Clarity
Christie DeSanctis, CDeSanctis@nar.realtor, 202-383-1102
Nia Duggins, nduggins@nar.realtor, 202-383-1085
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