The real estate industry — representing affordable housing and construction jobs as economic anxiety mounts — presents a more sympathetic case to lawmakers than the other main beneficiaries of carried interest: private equity and venture capital.

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"When you have a development that a member of Congress can see or can imagine in their district, that resonates," said Greg Brown of the National Apartment Association, who oversaw an 800-member lobbying event in March to press Congress on carried interest and other issues important to his group. 

"The president himself having talked about carried interest, you have to take it seriously," he said.

Putting real estate at the center of the influence campaign is a key prong of the strategy that greatly boosts the effort to fend off changes to the valuable tax break, those focused on the lobbying effort say. The industry has emphasized that the housing sector is comprised of many mom-and-pop ventures, not large financial firms.

But the lines between the real estate sector and billionaire buyout executives have blurred in recent years. The biggest alternative asset managers — including Blackstone Inc. to KKR & Co. Inc. — run both private equity and real estate funds. Big Wall Street-backed landlords have drawn the ire of Democrats for buying up swathes of single family homes, sparking debates about housing affordability.

The White House has listed carried interest — a tax break that allows certain industries to pay the lower 20% capital gains rate on portions of their income — as well as ending unspecified tax breaks for sports team owners as ways to raise some revenue to offset portions of a multi-trillion-dollar tax bill. Republicans have also considered a tax increase on millionaires, a concept Trump said he loves, but isn't inclined to pursue because of potential political ramifications.

The relatively short list of potential tax offsets, and a long tally of new priorities to jam into a bill where they have to abide by strict limitations on the total cost, puts carried interest in a precarious position.

"We have heard from interest groups from around the country and we want to do right by them," House Speaker Mike Johnson told reporters on Tuesday, adding that he wouldn't discuss the details before the House Ways and Means Committee releases their plan. "All boats are going to rise."

Lobbyists are trying to front-run any efforts by House Republicans to eliminate the provision by convincing lawmakers that economic development in their districts will suffer without the break.

"It would especially be felt in projects involving cleaning up contaminated land, building in low-income or neglected neighborhoods and other projects that have more risk but more potential upside," said Ryan McCormick of The Real Estate Roundtable, an industry trade group.

An April study circulated on Capitol Hill by the industry predicted that a nearly 4% long-run contraction in the real estate industry if the tax break goes away.

"That is something we have heard a lot about from people in opposition. The real estate industry, venture capitalists are concerned about the carried interest proposal," New York Republican Nicole Malliotakis told Bloomberg Television. 

McCormick said that real estate investors take the same type of risks in their projects as long-term equity investors and their "sweat equity" should be taxed at the 20% capital gains rate, rather than at income rates that top out at 37%.

He said that lawmakers he's talked to understand arguments that small real estate entrepreneurs take on significant risk when developing low-income areas.

"Housing will become significantly more expensive without this provision," said Matthew Berger of the National Multifamily Housing Council. "Basically, it is a tool real estate partners use to make sure the economics of the deal work."

Two-decade battle

The battle over carried interest has been fought for close to two decades, but the finance and real estate industries has largely succeeded in fending off any significant threats to the break. It was scaled back in Trump's 2017 tax package to require a three year holding period, up from one year, in order to qualify for the lower tax rate.

Under former President Joe Biden, a provision eliminating the tax break was scrapped at the last minutes from the Democrats' signature climate and tax law at the behest of Arizona Senator Kyrsten Sinema, who was seen as being a lone ally of the venture capital and private equity industry in her party.

Lobbying firms advocating on both sides of the carried interest issue reported spending $8.7 million in the first quarter of 2025, according to federal lobbying disclosures. That's up from $7.7 million in the same quarter last year. Key players outside the real estate industry include the American Investment Council and National Venture Capital Association. 

Proponents of changing the carried interest provision say wealthy investors are just trying to create a distraction to keep the benefit.

"All the defenders of the carried interest loophole are saying is that if you don't let us get richer, we will not serve low-income communities, which is not an argument so much as it is extortion," said Caroline Nagy, a housing policy specialist at Americans for Financial Reform.

David Kass of Americans for Tax Fairness, who advocates ending the carried interest, said increasing low-income housing credits are a more efficient way to spur construction for affordable homes.

He said that trying to make the issue about real estate is a sophisticated ploy by well-paid lobbyists. 

"These folks are incredibly wealthy and they have an army of lobbyists running around for them," Kass said. "It is always an uphill battle."