Findings: Like-Kind Exchanges Increase Real Estate Investment, Capital Improvements and Jobs. Repeal Would Disrupt Local Property Markets, Slow Economic Growth, Harm Tenants and Owners
July 10, 2015
A new microeconomic study details the implications a repeal of Section 1031 would have on the commercial real estate industry in the United States, finding a repeal would harm tenants and real estate owners and have negative effects on the U.S. Economy. Study authors found widespread use of like-kind exchanges for real estate. Benefits of the provision include improved liquidity and increased investment in the real estate market and contributions to job creation and Treasury revenue.
The report, “The Economic Impact of Repealing or Limiting Section 1031 Like-Kind Exchanges in Real Estate” shows that common misperceptions about the provision are false, and that government cost estimates are likely overstated while the benefits of the provision are overlooked.
Authors Professor David C. Ling of the University of Florida and Professor Milena Petrova of Syracuse University reviewed 1.6 million commercial real estate transaction between 1997 and 2014 to provide in-depth analysis on the state of like-kind exchanges in the commercial real estate market for the last two decades.
The microeconomic study complements and confirms findings of the March, 2015 Ernst & Young study, “Economic Impact of Repealing Like-Kind Exchange Rules,” finding that a repeal of Section 1031 would have significant negative effects on the U.S. Economy and is at cross-purposes with the goals of tax reform.
The Real Estate Like-Kind Exchange Coalition, of which FEA is a member, sponsored the Ling and Petrova microeconomic study.
Read an overview and download the study, “The Economic Impact of Repealing or Limiting Section 1031 in Real Estate” here.
Read the FEA press release here.