Money in politics: Trump’s Pardons and the Real Estate Sector’s Power In Biden’s Washington
In the last few hours of his presidency, Donald Trump issued 73 pardons and 73 commutations, a number of which were for titans in the real estate business. This is not surprising given the former president’s connection to the industry. Also not a surprise was the fact that many of these recipients of the president’s largess were “generous” donors to the president’s campaigns and/or the Republican Party.
One lucky winner in the pardon lottery was Douglas Jemal, a Washington, D.C. real estate mogul whose accomplishments include the redevelopment of the historic Woodward and Lothrop building, the Sixth & I synagogue, and the former Uline Arena. Perhaps not coincidentally, Jemal had made two large donations to the Republican National Committee during the 2020 presidential campaign for a total of $100,000, according to the Center for Responsive Politics.
Sholam Weiss, who was convicted of racketeering, money laundering, and other crimes in Florida in 1999, had his 835-year sentence commuted after being in prison for more than 18 years. Using a scheme involving mortgage-backed bonds, he helped defraud the National Heritage Life Insurance Co. of $450 million leading to its collapse in 1994 and costing many investors their life savings.
This was definitely a case of “money talks” according to Joe Judge, a former FBI agent who spent six years investigating Weiss and then another year after he skipped bail and fled the country, according to a report by WFTV.com on January 21, 2021.
It was unclear if Trump knew Weiss prior to Trump’s becoming president, according to the same report. But according to court records from September 1998, Weiss, who was serving in a half-way house because of an earlier crime, had requested leave to go home for Passover. Instead, he left on a Lear jet made available by the Trump Plaza Hotel and Casino in Atlantic City, New Jersey, where he also was given a complimentary room.
Money in politics is not new. But the sheer volume of it flowing into candidate elections since the 2010 Supreme Court Citizens United decision is different and it is palpable, each successive election since has been the most expensive in history. That decision, along with other lesser-known Supreme Court decisions, eviscerated common sense campaign finance limitations, giving corporations even more power through unlimited political spending. Over the past decade, a conservative Supreme Court majority has made a campaign finance system already stacked to favor wealthy white Americans even more unfair and undemocratic.
The real estate industry spends millions on lobbyists and campaign contributions. According to OpenSecrets.org. from 2019 to 2020, the National Association of Realtors contributed more than $33 million to candidates, committees, and outside money groups. One company, Marcus & Millichap, a multi-faceted real estate company and one of the largest in the US, contributed over $13 million alone.
It is not surprising when developers seek favors, arguing that their buildings help revitalize an area and bring in new tax revenue. Often developers are allowed variances from the building code so they can build more housing units than would otherwise be allowed, partially because politicians are focusing on the dollars that will flow to city or county coffers from real estate taxes.
There are many ways that the real estate industry, along with other wealthy constituencies, get rewarded for their fealty to politicians. The creation of so-called Opportunity Zones (OZs)—the stated purpose of which is to help the redevelopment of impoverished neighborhoods—was a part of Trump’s 2017 Tax Cuts and Job Act. Investors who take advantage of this financial vehicle can receive breaks on capital gains taxes or complete elimination of these taxes if they stick with the investment for at least ten years. The developers using OZs the most include close Trump allies the Kushner family, including son-in-law Jared, Anthony Scaramucci, Former New Jersey Governor Chris Christie, and Richard LeFrak, a New York developer close to Trump.
But OZs have come under fire for their lack of benefit for the mostly Black, Latinx, and Asian American Pacific Islander residents occupying these neighborhoods, according to a report by the Urban Institute which came out last June. While OZs have attracted some investors and developers “with limited historical engagement with community development work…many mission-oriented actors are struggling to access capital. Many project sponsors are struggling to access the class of investors—wealthy individuals and corporations with capital gains—for whom the OZ incentives are tailored. Additionally, many mission-oriented projects yield below-market returns that most OZ investors are unwilling to accept.”
In spite of OZ’s critics, with the new Biden administration, there have been calls, not to scrap them, but to re-define them so that they produce more benefits for impoverished communities than they have thus far.
The original program was criticized because the zones were “poorly targeted with already gentrifying neighborhoods qualifying as opportunity zones and the original legislation containing no requirements that those in the zones actually benefit from the jobs created,” according to an article in Forbes magazine on January 15, 2021.
But for all of its faults, the Urban Institute believes that OZs could be a force for good in a world that ordinarily offers little opportunity to the people who need it most. The COVID-19 health crisis and the economic recession it is causing, “add significantly to the list of challenges for practitioners looking to use the OZ incentive,” noted the organization’s report. But because the pandemic has such a devastating effect on small businesses, many of which are unable to pay rent at a time when residential tenants are similarly stressed, these two groups may have a chance of solving their common problem together.
The Urban Institute opines: “…the crisis may provide an opportunity to re-think and re-design the OZ incentive so it can play a stronger role in helping hard-hit communities recover.” But it remains to be seen if OZs can be transformed from a boondoggle for real estate investors to a genuine tool for the revitalization of impoverished neighborhoods.
Hortense Leon is a freelance business reporter specializing in real estate. Her work has appeared in The Real Deal, Urban Land, and Mortgage Banking magazine, among other publications. She lives in Miami, but as a Midwestern transplant, she suffers from survivor’s guilt when it is 75 degrees in February and March.