Is Biden’s climate bill good or bad news for real estate investors?

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On August 16, President Joe Biden signed into law the Inflation Reduction Act (IRA), a $437 billion package of spending on health care, energy, and climate initiatives.

 

Even as a scaled-down version of the Build Back Better bill (which would have totaled $2 trillion and which was a centerpiece of Biden’s legislative agenda), it’s the most significant climate legislation the country has ever passed.

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The climate section of the IRA includes various provisions that are of great significance for homeowners and real estate investors, especially those with an eye on their carbon footprint or those who have been looking to upgrade outdated heating and cooling systems and improve their homes’ insulation.

 

By doing so, investors may furthermore increase the potential resale value of their homes.

 

The IRA includes some $437 billion in investments over the span of a decade. It aims to encourage consumers to invest in electric vehicles and push electric utilities toward renewable energy sources like solar power or wind.

 

The IRA puts the U.S. on track to reduce its carbon emissions by 40 percent from 2005 levels, according to one estimate.

Addressing emissions in the housing industry will be hugely significant, since the residential sector accounts for more than 20 percent of U.S. energy consumption, according to the U.S. Energy Information Administration.

Taxes: good news and bad news

All that spending has to be paid for somehow. The IRA will raise money partly by imposing a corporate minimum tax on very large corporations. Small business owners and real estate investors are not likely to see their taxes go up.

 

The other good news for some real estate investors is that thanks to the efforts of Arizona Senator Kyrsten Sinema, the carried interest loophole remains untouched.

 

Through this legislation, some real estate syndicators, fund managers, and other professionals are paid in this way and are taxed at the capital gains rate, which is much lower than the ordinary income rate.

 

The IRA does, however, give considerably more teeth to a long-underfunded Internal Revenue Service. Tax audits have been at historic lows, but the agency will receive nearly $80 billion in funding over the next decade.

 

Currently staffed with about 78,000 workers, the agency is expected to hire about 87,000 new agents, allowing it to greatly increase its auditing power.

 

Investors who claim real estate professional status or the short-term rental loophole may come in for increased scrutiny.

Since well-off filers have armies of experts helping to defend their interests, it may be that middle-class filers will get more love letters from the IRS.

 

As always, thorough record-keeping ahead of any potential audit, not in response to one once it happens, is advisable.

But there remain many good ways to find tax advantages in real estate investing. For example, bonus depreciation is beginning to wind down in 2023.

What are the tax breaks and rebates for green renovations?

The bill includes rebates and tax breaks for property owners to add electrical appliances for heating and cooling their homes when renovating their properties, including rooftop solar panels, electric HVAC, and electric water heaters.

To qualify products generally have to meet Energy Department standards.

 

The potential tax savings for homeowners would be an estimated $1.6 billion in 2023 alone, up from an estimated $253 million in 2022 for the old credit, according to estimates by the Congressional Budget Office.

 

Over the 10 years, the bill is in effect, that figure could rise to $14.5 billion.

 

The legislation provides for $9 billion in energy rebates. Part of that is the $4.28 billion High-Efficiency Electric Home Rebate Program, which provides a rebate of up to $8,000 for property owners to install heat pumps.

 

These are electrical appliances that can both heat and cool homes and, since they do not rely on combustion, are more efficient than traditional furnaces.

 

Those who don’t qualify for rebates can get a tax credit of up to $2,000 to install heat pumps.

 

It also provides a rebate of as much as $1,750 for water heaters that are driven by heat pumps.

 

Homeowners may qualify for as much as $840 to offset the cost of a heat-pump clothes dryer or an electric stove.

 

To support all these electric appliances, many property owners will find they need to upgrade their electrical panels. The program provides a $4,000 rebate for that purpose.

 

Furthermore, heat pumps work best in a well-insulated home; the IRA provides a rebate of up to $1,600 to insulate and seal a house, and a rebate of up to $2,500 for upgrades to electrical wiring.

 

“Taxpayers can budget out different energy-efficient upgrades over a 10-year period,” Vincent Barnes, senior vice president of policy and research at the nonprofit Alliance to Save Energy, told the Wall Street Journal. “Insulation one year. Windows and doors another year.”

 

The program is to be run by the states, and it lasts through Sept. 30, 2031. The maximum that can be collected by any one homeowner would be $14,000 in rebates.

Solar panels

It may be true that investors are unlikely to install solar panels solely in order to reduce energy bills, since they are likely to pass on those costs to their renters anyway.

 

But some say that innovations like solar panels and heat pumps and electric vehicle charging stations, as well as, offering to include utilities in rent, can be attractive to tenants.

 

The legislation reintroduces a 30 percent tax credit for installing solar panels and extends the program through the end of 2034.

The tax credit would go down to 26 percent for solar panels installed after Dec. 31, 2032, and before Jan. 1, 2034. Those who install solar battery systems with at least three kilowatt-hours of capacity would qualify for the tax credit.

 

For example, if an investor who qualifies for the credit and meets the wage and apprenticeship rules installs a new $20,000 solar panel system on a U.S. rental duplex, the IRS will pay for 30 percent of the cost of the system, or $6,000.

 

Making this benefit even more appealing is that the panels get depreciated over just five years, even though they will likely last as long as 30 years. The investor must hold on to the property for at least five years, or the IRS will recapture the credit.

 

If the owner installs the panels in a low-income community, the IRA ups the credit by 10 percent. If the investor installs the panels on a qualified low-income residential building project, that goes up by 20 percent, and there are bonus credits for installing panels in an “energy community” (think West Virginia coal country).

EV charging stations

Property owners in low-income areas and rural communities who have had an eye on installing new electric vehicle charging stations will want to take a close look at the Alternative Fuel Refueling Property Credit, which is in effect between January 1, 2023, and December 31, 2032.

 

For example, the owner of a small office building in a low-income community installs 10 EV chargers in the building’s parking lot for $3,500 each (including parts and labor).

 

If they qualify for the credit and meet the wage and apprenticeship rules, they can get the IRS to pay for 30 percent of the cost of the chargers, or $10,500.

 

The charger must be located in the U.S., and it must be new. If wage and apprenticeship rules aren’t met, the credit is much less, only 6 percent.

 

The credit maxes out at $100,000 per item of property. (Previously, the limit was only $30,000, and it was per property, not item.)

 

This article originally appeared on Mynd.co and was syndicated by MediaFeed.org.

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The US city least affected by climate change

 

 

 

With record-breaking heat, sea levels rising, and a surge in devastating storms and wildfires, there’s no denying climate change is here. It’s likely to only get worse in coming decades, and that can affect the decisions you make today. Thirty-year mortgages are the norm when buying a home, so where you decide to settle down now could look markedly different in the years to come.

 

That’s why it’s important to know which areas are more vulnerable to the effects of climate change than others.

 

We looked at the top 50 largest urban areas in the United States and measured them against several climate change indicators to paint a picture of which ones might fare better as temps warm and sea levels rise over the next few decades.

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Using 2020 U.S. Census Bureau data, we identified the 452 most populated metro statistical areas in the country. We then analyzed data from the Federal Emergency Management Agency (FEMA), the U.S. Environmental Protection Agency (EPA), and several other studies across six key factors to determine which of those metro areas were the best and worst for climate change.

Weighing each factor equally, the result is a theoretical suggestion of which cities might fare best or worst in the coming 30 years. And since we only looked at the 50 largest cities in the U.S., it bears to keep in mind that while these cities have the lowest risk on our list, they actually may have a much higher risk than many smaller cities in the U.S.

For more details, see our full methodology

Here are the 10 cities that are least affected by climate change.

Read more: Thousands of dangerous asteroids whizzed past Earth this year

 

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Though Denver residents can expect an average of 33 days of extreme heat by 2050, its lack of humidity isn’t projected to change over the coming decades. And while there’s some flooding risk — with almost 3% of homes expected to be in a 100-year flood zone by 2050 — the overall increase is low at just 0.1%.

So, is Colorado devoid of any severe climate-related challenges? Not quite. It scores similarly to Portland and Seattle in its risk of wildfires. But unlike those other two cities, it scores below average for air quality — with just 43% of days measuring “good” in 2021.

Unfortunately, the city doesn’t seem to be as good at adapting to the changing climate as others on our best list, scoring fairly low for its community resilience.

 

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Even though Richmond residents can expect a full month of extreme heat by 2050, it still comes in below the average of 44 days for the cities in this study.

Instead, the historic city’s real threat lies in the rising sea level and hurricane risk. Three percent of Richmond homes are expected to be at risk for flooding in 2050 — nearly double the average on this list. And the percentage of homes in 100-year flood zones is expected to rise to 5.3%. Add to this the increase in hurricanes in Richmond as storms make landfall in the Carolinas and move inland, and we’re looking at a perfect storm for flooding.

Fortunately, with those stormy skies comes relatively good air quality: 87% of the measured days in 2021 had “good” air quality in Richmond versus the average of 63%.

It also scores high for both community resilience and social vulnerability, most likely thanks to its RVAgreen 2050 initiative to achieve net zero greenhouse gas emissions by 2050 and help the community adapt to the effects of extreme heat, rain, and flooding.

 

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Like Portland, the City of Bridges isn’t projected to get too, too hot. Residents can expect to see just 10 days of extreme heat and just over 13 days of high heat and humidity each year by 2050 — both below average compared to the other cities in this study.

But the same can’t be said for flooding. Situated along three rivers, Pittsburgh has a higher-than-normal portion of homes that will be in 100-year flood plains by 2050: 12.4% versus the average of 11% for the cities in this study. Though this is only up 0.4% from today, it shows the necessity for the city to start planning now for this continued trend in flood risk.

With no hurricane or wildfire risk, and a generally low risk of tornadoes, the only other main concern Pittsburgh residents should have is the city’s poor air quality. Only 47% of measured days in 2021 were “good,” versus the 63% average.

This is most likely due to high hydrogen sulfide rates caused by steel plants in the area. But with U.S. Steel canceling plans for $1 billion in upgrades to three of its Mon Valley Works facilities in 2021, clean air advocates expect to see an improvement in air quality over the next few years.

But the city is resilient, earning the second-highest community resilience score of the cities on our best list. This is probably thanks in large part to the Pittsburgh Equity Indicators project it started back in 2017, which is focusing efforts on improving air quality issues, inequality, public health challenges, and other stressors affecting residents.

 

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While Portland is getting hotter, it’s not nearly as balmy as other cities on this list. By 2050, the Rose City will only see 13 extreme heat days and around nine days with high heat and humidity. Though this is more than residents are currently experiencing, it’s still below average for the cities in this study.

But where Portland stands out is its higher-than-average percentage of properties flooding by 2050. Around 12% of homes and businesses will be located in 100-year flood zones — over 1% more than today and the highest increase of any city on our best list.

Fortunately, like Seattle and San Francisco, the air quality in Portland seems relatively unaffected by the acres of burning forests in its backyard. Air quality is well above average, with 89% of measured days registering as “good.”

As for its social vulnerability and community resilience scores, they’re both middle-of-the-road compared to the other cities in this best list. We’re a bit surprised it didn’t fare better in terms of preparedness for climate change. After all, it was the first city in the U.S. to create a local action plan for cutting carbon back in 1993.

 

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Milwaukee slides in at number six on our best cities for climate change list thanks to its below-average number of days with extreme heat predicted for 2050 — just 9 days versus the average of 44 days for the rest of the cities in this study. However, it’ll still feel the effects of heat and humidity as much as other cities on this list — a projected 19 days for 2050 (compared to the average of 18 days for all of the cities in this index).

While you’d expect a city situated on Lake Michigan to see an above-average threat of flooding, that’s not the case. By 2050, just shy of 5% of Milwaukee properties will be in 100-year flood plains, an increase of only 0.35% over today. But its air quality isn’t quite the breath of fresh air you’d expect — just 58% of days in 2021 were considered “good” air quality versus the 63% average for the cities in this index.

Milwaukee might be prepared for the changing climate — scoring high marks for its community resiliency score — but the same can’t be said for its social vulnerability score. The city scores four times lower than the other cities in this top 10 list. While this likely has more to do with the civil unrest and record-breaking violence the city has seen in the wake of the George Floyd in 2020, it may be indicative of how quickly the residents would bounce back after a climate-related disaster.

 

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Like Columbus and Minneapolis, residents of Baltimore can expect to feel the biggest effects of climate change in the form of hotter temps. The Charm City can expect an average of 24 days of extreme heat and 11 days of high heat and humidity per year by 2050. That’s an increase of around 18 days and 10 days, respectively. And it appears that Baltimore’s warm summer breeze is clean, too — 75% of the measured days in 2021 were registered as “good” air quality.

What about flooding? Even though the city sits on the Chesapeake Bay, the rise in sea level isn’t going to be a huge issue over the next 30 years: Just 4.8% of properties will be in 100-year flood plains by 2050, an increase of just 0.4% from today.

Baltimore also scores high on its social and community resiliency scores, which isn’t surprising considering the city completely overhauled its disaster preparedness plan in 2018 and is taking steps to achieve full carbon neutrality by 2045.

 

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Coming in at number four on our list, the biggest threat Minneapolis residents face is heat. By 2050, residents can expect around 15 extremely hot days per year — that’s nearly 13 more than today. And those rising temps will see with it a rising dew point: Days with high heat and humidity are also expected to increase to almost 19 days per year — 14 more than today.

While 7.2% of properties will be in 100-year flood zones come 2050, that’s just 0.1% more than today.

So how is the city preparing for this sweltering heat wave? Pretty well, if its community resiliency score has anything to say about it. Since 2013, the city has been working to reduce energy use, recycle half of all city waste, and build 30 miles of bicycle lanes to promote green transportation in an effort to reduce greenhouse gas emissions by 30% by 2025.

 

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Columbus is three on our list for best cities for climate change, though some of its projected numbers will make you realize that our top two cities are largely anomalies in how relatively unaffected they’ll be by the changing climate. Climate change is coming for most of us, even in top ranking cities in this study.

The biggest risk facing Columbus residents is heat. Ohioans can expect steamier summers come 2050 with an average of 20 days of extreme heat predicted — 18 more days than they’re experiencing now. And unfortunately, that’s not a dry heat. The number of days with high heat and humidity is similarly expected to increase to nearly 17 annually by 2050 — almost 15 more days than today.

On the brighter side, the risk of hurricanes, tornadoes, and wildfires remains low as time goes on. Flooding also shouldn’t be a big issue in the future: The percentage of properties in 100-year flood zones is only expected to rise 0.5% versus today — to 4.4% in 2050.

Though number three on our list, Columbus takes down Seattle and San Francisco when it comes to a high community resiliency score. The Ohio capital is well-positioned to adapt to its changing climate — thanks largely in part to Mayor Ginther’s bold climate action plan for the city to reach carbon neutrality by 2050.

 

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Seattle doesn’t expect to see a drastic increase in days with extreme heat or high heat and humidity. Just four extreme heat days are projected annually from 2040 to 2059, and less than two days with high heat and humidity.

The biggest concern for Seattleites? Flooding, though even those numbers are relatively low for a city that sits on the Puget Sound. Less than 10% of its properties are expected to be in 100-year flood zones by 2050 — and that’s just a 0.5% increase from properties in flood zones today. And even though sea level rise is expected to affect 0.35% of properties by 2050, that’s well below the 1.35% average for the cities in our study.

Surprisingly, its wildfire risk remains low considering the rest of the state has seen an increase in blazes from 2020 to 2021. And although it’s starting to see a “smoke season” from wildfires burning throughout the West, air quality in Seattle is better than the average of the cities in our study: 83% of days in 2021 were “good” air quality versus the average of 63%.

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California may not be the first place that comes to mind when you think of climate resiliency, but San Francisco is a different story, earning the highest score of the 50 cities in our study.

Heat isn’t a major issue in San Francisco, and climate change isn’t expected to drastically change that. The Golden City is predicted to have just three days of extreme heat per year by 2050, and less than a full day of high heat and humidity.

Sea level rise is also expected to minimally impact residential areas of San Francisco, despite its location on its namesake bay. A low percentage of properties are in 100-year flood plains, and that’s not expected to change at all in the next 30 years.

San Fran is also largely immune to the climate-related disasters we measured in our study, with few hurricanes and tornadoes expected. And though Northern California is very prone to wildfires, San Francisco itself is not. Nearby Santa Clara County’s annualized wildfire occurrence is 5,215% higher than San Francisco.

Despite those nearby wildfires affecting air quality, San Francisco still fared better than the average of the cities on this list, with 86% of days in 2021 registering “good” air quality.

For the two social factors we considered, San Francisco scored well on social vulnerability, which measures how susceptible a community is to natural disaster. It didn’t score as favorably on community resilience, which measures how well a community is preparing and adapting for climate change. But given how little climate change is expected to affect the city, perhaps we can forgive them that.

San Francisco: Our number one city for escaping climate change — though obviously potential earthquakes are a different story.

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As climate change continues to wreak havoc across the U.S., it’s getting harder and more expensive to buy homeowners insurance in the cities at the highest risk of natural disasters. Many insurance companies have pulled out of Florida and California due to the heightened risk of hurricanes and wildfires, leaving homeowners scrambling to find coverage through their state’s Fair Access to Insurance Requirements (FAIR) Plans.

To help minimize the burden of climate change on your purse strings — and ensure your home is fully protected should disaster strike — here are a few tips for purchasing home insurance amid an ever-changing climate.

 

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Weather-proofing your home to mitigate damage can pay off in the form of lower homeowners insurance premiums. If you live in an area prone to hurricanes or tornadoes, installing storm shutters to your windows and hurricane straps to your roof can add an extra layer of protection from the elements.

Similarly, if you live in an area at high risk of wildfires, taking the steps to install comprehensive sprinkler systems throughout your property, clearing brush piles at greater risk of catching fire, and adding fire alarm security systems that automatically alert local authorities to a fire are all ways to prevent blazes and lower your home insurance costs in the process.

 

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With a changing climate comes changing risks to your home. For example, as sea levels rise, so does the risk of your home ending up in a high-risk flood zone. The same can be said for rising temperatures and wildfires, and increased hurricanes and wind damage.

Reassessing your home’s coverage needs each year can help ensure you have enough protection to fully rebuild your home and replace your belongings should a natural disaster hit.

This might mean buying separate flood insurance or windstorm coverage in addition to your standard homeowners insurance. Or adding an endorsement for wildfire coverage to your existing policy if your city sees an increased risk of blazes over the coming years.

 

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No two insurance companies assess your home’s risk the same way. This is why it pays to re-shop your policy each year to make sure you’re still getting the best deal possible amid the changing climate. Some insurers might place more weight on your home’s flood risk than others. Same goes for your home’s risk of wildfires or windstorms.

The easiest way to re-shop your policy is to use an insurance marketplace that will do the work for you. You essentially fill out a short form online to provide information about you, your home, and your coverage needs, and a licensed agent will crunch the numbers to find you the best policy at the best price. They’ll even help you switch companiespurchase your new policy, and cancel your old one — all for free.

 

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To identify the best places to live by 2050 if you’re worried about climate change, we analyzed the 50 largest urban areas in the United States across 13 data points:

  • Number of days with extreme heat: Projected average number of days from 2040 to 2059 with temperatures above 95 degrees Fahrenheit. (Rasmussen, D. J.; Meinshausen, Malte; Kopp, Robert E.)

  • Increase in days with extreme heat: Projected increase in extreme heat days compared to the present day. (Rasmussen, D. J.; Meinshausen, Malte; Kopp, Robert E.)

  • Number of days with high wet bulb temperatures: Projected average number of days from 2040 to 2059 with wet bulb temperatures above 80 degrees Fahrenheit. (Rasmussen, D. J.; Meinshausen, Malte; Kopp, Robert E.)

  • Increase in days with high wet bulb temperatures: Projected increase in extreme heat days compared to the present day. (Rasmussen, D. J.; Meinshausen, Malte; Kopp, Robert E.)

  • Percentage of properties at risk of sea level rise: Percentage of properties with at least a 10% annual chance of flooding by 2050, based on local sea level rise projections. (Zillow; Climate Central)

  • Percentage of property in flood zones: Percentage of properties in 100-year flood plains by 2050. (First Street Foundation)

  • Increase in percentage of properties in flood zones: Projected increase in the percentage of properties in flood zones compared to the present day. (First Street Foundation)

  • Probability of hurricanes: Annualized frequency of hurricanes from January 2014 to April 2021. (FEMA)

  • Probability of tornadoes: Annualized frequency of tornadoes from January 2014 to April 2021. (FEMA)

  • Probability of wildfires: Annualized frequency of wildfires from January 2014 to April 2021. (FEMA)

  • Air quality: Percentage of measured days in 2021 in which the air quality was considered “good.” (Environmental Protection Agency)

  • How vulnerable a place is to climate change: The susceptibility of a community to the adverse impacts of natural hazards, including disproportionate death, injury, loss, or disruption of livelihood. (University of South Carolina)

  • How resilient a place is at preparing and adapting to climate change: The ability of a community to prepare for natural hazards, adapt to changing conditions, and recover rapidly from disruptions. (University of South Carolina)

Weighing each of these 13 data points equally, we ranked and scored each urban area based on these factors. Top rankings are directly correlated with a low number of extremely hot and high wet bulb temperature days, a low percentage of properties and total property values with sea level rise or flood risk, a low probability of natural hazards, a high percentage of days with good air quality, a low social vulnerability score, and a high community resiliency score.

This article originally appeared on Policygenius.com and was syndicated by MediaFeed.org.

 

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