The Next Tax Reform Should Unlock More Housing

One of the biggest success stories of the Working Families Tax Cuts was permanent full business expensing for the business assets covered by the law. That reform strengthened investment by letting businesses deduct costs upfront instead of dragging those deductions out over years. Now the next step is clear. Policymakers should move toward full expensing for business structures too, including multifamily housing, factories, offices, warehouses, and other buildings that help the economy grow.

A recent Center for American Progress analysis points in that direction. CAP found that immediate tax expensing for new multifamily rental housing could help produce 706,000 to 1,062,000 new homes over the next decade. That matters because the housing debate too often gets distracted by price controls, investor crackdowns, and attacks on private capital. Those ideas may sound tough, but they do not add supply. They risk making housing shortages worse by driving away the financing and liquidity that builders need to build.

The Path Already Exists

Congress did not get to full expensing for business assets all at once. It happened in stages.

For years, lawmakers increased the dollar amount of investment that businesses could expense immediately, while requiring the rest to be depreciated over time. Then that dollar amount grew. Then it grew again. Eventually, the limit became large enough, and the case became strong enough, that full expensing became reality for the assets covered by the law.

That same model can work for structures.

Congress does not need to leap overnight from the current system to full expensing for every business building. It can start with a defined dollar amount of expensing for new structures, with the remainder still depreciated over time. Then it can raise that dollar amount in later legislation. Over time, the cap can grow until full expensing for structures becomes a reality too.

Why Structures Still Get the Short End of the Stick

The tax code still treats buildings worse than many other forms of business investment. Equipment and similar assets often get better cost recovery treatment. Structures do not. That puts multifamily housing and other buildings at a disadvantage even though they are essential to economic growth and, in the case of housing, badly needed supply.

This timing issue matters. A deduction received years from now is worth less than one received today. When builders have to recover costs slowly over long depreciation schedules, the after-tax cost of construction rises. That means fewer projects pencil out. Fewer projects mean fewer apartments, less commercial space, and less industrial capacity.

That is why a policy that improves cost recovery for multifamily housing deserves serious attention. It would not solve every housing problem. Zoning, permitting, local regulation, and land use rules still matter. But federal tax policy should not make construction harder than it already is.

More Supply, Not More Political Theater

The broader housing debate often misses this point. Housing becomes more affordable when more housing gets built. Policies that punish investment do not help. They reduce the flow of capital into the very projects that expand supply.

A recent RealClearMarkets article made that point well. Pushing out institutional buyers and cracking down on private investment may be sold as affordable housing policy, but it can backfire. Less liquidity means less building. Less building means tighter supply. Tighter supply means higher prices.

That is why tax policy matters so much. If Washington wants more housing, it should reduce the tax penalty on building it.

Start With Multifamily, Then Keep Going

Multifamily housing is the logical place to begin because the need is so obvious. The country still needs more homes, and rental housing remains under pressure in many markets. If immediate expensing can help unlock more apartment construction, Congress should use that as a starting point.

But this should not stop at housing. The same principle applies to factories, offices, warehouses, and other business structures. The economy needs places to live, make things, store goods, and do business. The tax code should not discriminate against building them.

The right way forward is the same path that worked before. Start with a modest expensing amount for structures. Keep the rest under depreciation. Raise the expensing limit over time. Build momentum. Then finish the job.

CFE Takeaway

Permanent full expensing for business assets showed that better tax treatment can unlock more investment and stronger growth. The next reform should build on that success by extending the same logic to business structures. Start with multifamily housing and a defined expensing amount. Increase that amount over time. Then keep going until the tax code stops punishing the construction of the homes, factories, offices, and other buildings the country needs.