ShareFew dispute that the nation’s infrastructure is in need of repair. The American Society of Civil Engineers famously gives U.S. infrastructure a grade of C–. Individual sectors fare better—or worse. The ASCE also contends that if needed investment isn’t made throughout all infrastructure sectors, the economy could lose more than $10.3 trillion in gross domestic product. Losses are expected to include $2.4 trillion in exports, while imports into the U.S. economy will decrease by about $1.8 trillion.
President Joe Biden’s $2.3 trillion American Jobs Plan, unveiled on March 31, proposes a nearly $1.3 trillion investment in transportation and community infrastructure. Critics say the plan is overreaching in scope and cost. Republicans have proposed a more targeted approach.
Although the National Association of REALTORS® has not taken a position on these plans, elements of both proposals address infrastructure issues that the association has weighed in on for years. Here we look at three major infrastructure areas in the Biden plan and their potential impact on the commercial real estate sector.
Roads and Bridges
AJP recommendation: $115 billion ASCE grade: D (roads); C (bridges)
There are 4 million miles of public roadways in the U.S. and over 617,000 bridges, and vehicle miles traveled on them were 2.83 trillion in 2020. That’s a lot of people and goods being transported.
The ASCE estimates the U.S. system of roads and bridges currently needs $786 billion in repairs and improvements. Repairs for existing roads account for $435 billion, while $125 billion is needed for bridge repair, $120 billion for expansion, and $105 billion for safety upgrades. Without repairs, delays and bottlenecks could grow.
“Investment in roads and bridges is vital,” says Don Davis, vice president of advocacy and codes for Building Owners and Managers Association International. “They’re important as a conduit for getting people to commercial real estate.”
Public Transit
AJP recommendation: $85 billion ASCE grade: D–
There are 6,800 public transit organizations across the U.S., providing access to the jobs, schools, shopping, health care, and other services that fuel the commercial real estate sector. Much of the current system is aging. The ASCE estimates that over the next 10 years, costs to procure new vehicles are likely to grow to $770 million, while those for vehicle maintenance could reach $7.3 billion. Service interruptions are predicted to cost passengers nearly $1.2 billion.
COVID-19 has only exacerbated the woes of systems that already lacked sufficient funds to keep their assets in good working order. In a post-pandemic world, infrastructure investment for transit will likely need to focus on more than just repairs to keep many systems running.
“Not only do we need to improve the physical condition of transit,” says Davis, “but we also need to invest in and improve the way transit is used so that health and safety are addressed going forward.”
Broadband
AJP recommendation: $100 billion ASCE grade: No grade (new category)
Broadband is increasingly important for the commercial sector. It allows businesses to reach customers and workers and provides access to health care and job openings. It can also be an important factor in where companies choose to locate. However, 65% of U.S. counties have average connection speeds lower than the Federal Communications Commission’s definition of broadband.
Increasing access to broadband could bring big benefits. “Communities prosper when they gain access to highspeed internet—property values increase, businesses grow, and jobs are created,” says Sarah Young, director of real estate services and policy oversight at NAR.
One area of concern: The Biden administration has signaled an interest in developing broadband as a utility, and neighborhood broadband hubs are sometimes located in commercial buildings. “We are concerned about private property potentially becoming a foundation for a utility,” says Davis.
Cutting Regulatory Red Tape
While investments in transportation and community infrastructure are clearly needed, questions remain about how the $2.3 trillion price tag of the overall American Jobs Plan will be paid for. The Biden administration proposes raising the necessary funds through an increase in corporate taxes over the next 15 years, which is controversial for many members of Congress.
Republicans’ smaller $568 billion infrastructure package includes just $189 billion in new spending, according to a Washington Post report. How all this plays out remains to be seen, but House Speaker Nancy Pelosi said in April she expects some form of infrastructure bill to reach the chamber’s floor by July 4.
In the meantime, the association will be working to ensure that the interests of commercial members are protected—not just in pending legislation but in proactively cutting through government red tape. “We’re pressing ahead on these infrastructure issues on behalf of our commercial members,” says Russell Riggs, senior policy analyst at NAR. “In addition, we will continue to identify regulatory barriers to commercial development and explore ways to mitigate regulatory burdens and incentivize innovative deregulatory efforts.”