NAHB to Congress: Expanding the Net Investment Income Tax Will Increase Housing Costs

NAHB Chairman Jerry Konter today sent a letter to leaders in Congress expressing NAHB’s strong opposition to proposals to expand the Net Investment Income Tax (NIIT), stating such a move would be counterproductive because it would increase housing costs and put upward pressure on rents at a time when the nation is in the midst of a housing affordability crisis.

The NIIT is a 3.8% surtax on income, such as capital gains, interest, rental and royalty income, and dividends.

When the NIIT was enacted as part of the Affordable Care Act, Congress explicitly limited its applicability to passive investment income. However, proposals in Build Back Better, and recently reported to be under consideration in the Senate, would expand the NIIT to include active investment income.

“Subjecting active business income to the NIIT will result in higher housing costs…particularly for renters,” Konter wrote.

“Multifamily property owners are facing the same financial stresses as any home owner. Operating costs are rising. Higher interest rates increase development and rehabilitation costs. Rising real estate values often translate into higher tax appraisals resulting in higher property tax bills…Along with ongoing demand for rental housing, these inflationary pressures are translating into higher rents,” the letter continued.

“Expanding the NIIT to include active investments has the same financial effect on property owners as increasing operating costs. If Congress moves forward with this proposal, property owners will have no choice but to pass some, if not all, of the tax burden on to their tenants.”

During a time when home prices and rents are rising faster than inflation, Konter urged Congress to focus on solving the housing affordability crisis by removing barriers, not imposing new ones.