Freshman Congressman Jared Polis (D-CO) is applying common sense tax relief to help local communities and small businesses participate in the revitalization of their local communities. This approach directly addresses the immediate need of local communities to move properties that have fallen to foreclosure back into the operating real estate market.
Squatter communities, crime and the escalating decay of properties have to be halted immediately as every month that these homes are left outside of the market, costs for re-investment skyrocket. Beyond the efforts of the Fed and Treasury to stabilize banking and financial services, there has to be a more grassroots response… and kudos to Mr. Polis for finding an elegant one.
The Enterprise Sector Investment Opportunity Act of 2009 and the Investment Property Opportunity Act of 2009 would waive capital gains taxes on private investments made in troubled financial sectors and residential real estate in high foreclosure areas.
With tax credits to servicers for successful loan modifications and HOPE for homeowners, there have been a number of “macro” initiatives aimed at incenting large banks and servicers to stem the tide of foreclosures before they occur. However, the reality is that on the “micro” level, many real estate markets are saturated with residential properties that have already been foreclosed and/or abandoned. These homes are directly depressing the valuation market of local communities and the property tax bases of local and state government. The question of how to move those fallow homes back into the operating real estate market is particularly troublesome as investors shy away from purchasing in distressed markets.
Investors are wary of residential properties in distressed markets due to the uncertainty of their end ROI and escalating costs of rehabilitating homes that have been abandoned or stripped. In reality, a home that is left without maintenance can deteriorate dramatically in weeks and months. This neatly tailored legislation offers a reprieve from capital gains on homes obtained in these distressed areas that will certainly incent investors to re-assess their return on investment in the short term.
Kudos to Congressman Polis for recognizing that “too big to fail” is a matter of perspective. For a local community, having a substantive portion of their real estate base in foreclosure is a different “too big to fail” proposition. As a country, we have been obsessed with the “macro,” following banks and Wall Street success and failure; however, my home, your home, is only tangentially related to those concerns. In reality, our wealth is directly tied to our local market and attention and diligence in supporting those concerns can turn a lot of “micros” into one enormous “macro” benefit.
For those investors, we can only hope that they make a fortune by opening up their investment funds, buying abandoned homes, spending locally on construction and improvements, paying those property taxes and then selling these homes back onto the market in a few years and then re-investing in our local and global markets.
Read Congressman Polis’ press release about the bill. Read Congressman Polis’ comments on the competitiveness of the Colorado business community.
