A Regulatory Framework for a New Administration

Summer 2017 Issue
By: Alex Ford

Uncertainty about how the Trump administration will fulfill its promises to vastly decrease the number of federal regulations is creating uncertainty for the CRE industry.

While the traditional legislative process can be slow and laborious, requiring a president to work with an oftentimes difficult Congress, an administration can also make major policy changes through the president’s unilateral authority to issue executive orders and control regulations issued by federal agencies. Like many presidents before him, Barack Obama used his executive authority to advance key priorities of his agenda, including immigration and climate change. What will the Trump presidency mean for the existing regulatory framework, and what role will it play as the new administration seeks to advance a policy agenda?

To help answer this question it’s worth looking at both the promises of then-candidate and the actions of now-President Donald Trump.

On the campaign trail, Trump pledged to do away with the vast majority of existing regulations, stating, “70 percent of regulations can go, it’s just stopping businesses from growing.” The president’s chief strategist, Steve Bannon, has also made clear that a top priority over the next four years will be “the deconstruction of the administrative state.”

Since taking the oath of office, Trump has moved quickly to fulfill these promises. On Day One of his presidency, Trump ordered agencies to halt any ongoing rulemaking and imposed a moratorium on future regulations.

Two weeks later, he issued an executive order (the so-called “one-in-two-out” rule) mandating that any new regulation be accompanied by the repeal of two existing regulations. The order also places additional emphasis on costs, and limits the amount of new regulatory costs agencies can impose on individuals and businesses each year. He’s even elevated the role of his “regulatory czar” — the informal title given to the Office of Information and Regulatory Affairs’ administrator, who is tasked with overseeing any rules promulgated by government agencies — to a level far greater than that of past presidencies.

While the administration’s broad goals for regulatory reform are clear, the details through which it plans to achieve them are somewhat murky. In other words, the devil, as is so often the case, is in the details.

This point is exemplified by the seemingly straightforward one-in-two-out rule, which has engendered a great deal of uncertainty. The order doesn’t actually spell out what constitutes a “regulation,” or whether independent agencies like the Environmental Protection Agency would be covered. It also fails to clearly define the term “costs,” granting agency heads vast leeway in determining the financial burden of new regulations on taxpayers. Its vague exemption for national security regulations is already being described as a potential loophole. In addition, the scope of the order is limited by the fact that it does not supersede laws that require agencies to issue new rules. (The Dodd-Frank Act, for example, requires that certain figures and thresholds be adjusted for inflation every five years, which is done by issuing new regulations.)

What impact will all of this have on NAIOP members? While at first glance many of these critiques might seem like nitpicking, they introduce a new layer of uncertainty regarding existing and future regulations on key issues.

Take the Waters of the U.S. (WOTUS) rule, a controversial regulation that would have expanded the federal government’s jurisdiction over certain types of waters. In November 2014, NAIOP submitted comments expressing concerns with the proposed rule, which had been held up in the courts. In early March 2017, President Trump took a step in rolling back WOTUS when he ordered EPA Administrator Scott Pruitt to formally review the rule.

Will the EPA seek to modify the rule and narrow its scope, or repeal it altogether? Under the one-in-two-out regime, would either of these two outcomes also require the repeal of additional, existing regulations? If a new WOTUS rule is introduced, how exactly will its cost be calculated? This dynamic, which creates a certain degree of unpredictability, extends beyond environmental regulations and touches a number of issue areas relevant to NAIOP members, from banking and finance to infrastructure. For developers looking to invest and expand, the shifting regulatory landscape does little to instill confidence.

Regulations play a critical role in shaping the health, welfare and economies of our society, but at times can also be overly burdensome. For proof, look no further than a 2010 Small Business Administration study on the impact of regulatory costs on small firms, which found that government regulations cost companies an added $10,585 per employee annually.

Going forward, it is clear that a key priority of this administration will be to pull back on the reins of the regulatory state and to take a more hands-off approach to the American economy. How the president actually goes about achieving that goal remains to be seen. This will remain an important concern for commercial real estate businesses for the next four years and beyond.

Alex Ford, director of federal affairs, NAIOP