The National Association of REALTORS® actively protects the interests of its 1 million members daily by advocating for federal policy initiatives that strengthen the ability of Americans to own, buy and sell real property. With a strong understanding of the challenges today’s commercial real estate brokers and their agents are facing, NAR advocates for regulation that will increase operating income, property values and equity for the commercial sector. Here are NAR’s most recent actions:
Lease Accounting
Issue: The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) have proposed new accounting rules that would force many companies to capitalize commercial leases onto their balance sheets. Larger balance sheets would force lessees to shorten lease terms to minimize costs. Since lessors raise financing by using the leases and the value of the property as collateral, the amounts they can borrow in the future could be reduced if lease terms are shortened.
Action: Working closely with FASB, IASB, and the Securities and Exchange Commission, NAR has written letters and added its voice to coalitions to express concern for the unintended economic consequence the new lease proposal would have on its members and the nation.
Basel III
Issue: NAR has substantial concerns regarding the high proposed risk weights for certain commercial asset classes. The proposal creates a new, risk-based capital category: High Volatility Commercial Real Estate Exposures (HVCRE) for commercial acquisition, development and construction (ADC) loans. Specifically, the proposed changes raise the risk-weight for an ADC loan from 100 percent to 150 percent. In response to the potential changes, it’s highly likely that banks would substantially change their current lending practices and reduce the amount of available commercial real estate credit to avoid the higher capital charges associated with ADC loans.
Action: NAR continues to meet with Congress and the Administration to ensure Basel III rules do not reduce liquidity in commercial real estate credit markets.
