Posted on November 23, 2020 - Uncategorized

2020 Election Brief

With two weeks to go until Election Day, I thought I share insight on where President Donald Trump and Former Vice President Joe Biden stand on their real estate / housing policies. Below are two key issues for each candidate, and a brief overview of the key points covered to explain them further.

President Donald Trump broadly believes that the government should have a limited role in housing regulation and finance. As such, his proposals and policies generally reduce the governments involvement in lending. Investors need to keep a close eye on proposals that will dramatically change zoning laws and incentives that promote new housing supply.

Privatize Freddie Mae and Fannie Mac.

Last year, the administration pushed for the Government Sponsored Entities conservatorship to come to an end.
After the 2008 financial crisis Freddie Mae and Fannie Mac received more than $190 billion from the treasury department. Together they Fannie and Freddie back about half of the nation’s mortgages, which is roughly $5 trillion of the total $10 trillion mortgage market.
Privatizing both mortgage loan companies could alter the popular 30-year, fixed-rate mortgage. Privatization reduces the risk that taxpayers would have to assume the cost of any future downturns.

Create Opportunity Zones

Introduced as part of the Republicans’ federal tax overhaul in 2017, Opportunity Zones (OZs) are defined as “economically-distressed communities where new investments, under certain conditions, may be eligible for preferential tax treatment.”
How it works is that each state nominates blocks of low-income areas by census tract, which are then certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service.
In August, Trump issued an executive order directing more federal agencies move their offices into opportunity zones and later said the program would be expanded but did not offer specifics.

Vice President Biden’s plans are mostly designed to assist those who face difficulty and discrimination in accessing the housing market. Broadly, his plans aim to make some progress addressing historical inequities in how housing finance and development has been conducted in the United States. Investors need to keep a careful watch on the development and rehabilitation of Class C and Class D asset classes.

Released a detailed $640 billion housing plan

Biden issued a wide-ranging plan to invest up to $640 billion in federal funds to improve public housing and provide rental assistance to a larger number of Americans, including issuing Section 8 housing vouchers to every eligible family and increasing funding to make that happen.
Proposing a $20 billion increase for the national Housing Trust Fund to incentivize states, municipalities and developers to build more affordable housing.
Also looking to expand the Low Income Housing Tax Credit program by $10 billion

Taxes

Create a new advanceable tax credit of up to $15,000 to increase homeownership. Homebuyers would get the tax credit when they purchase a home (before filing their taxes the next year) instead of paying out of pocket, then getting refunded at tax time.
Proposed raising the capital gains tax rate for individuals with incomes higher than $1 million and raising the top individual tax rate from 37 percent to 39.6 percent.
Biden’s administration supports limiting or repealing section 1031 like-kind exchanges for investors making over $400,000.
- Broadly stated, a 1031 Exchange (also called a like-kind exchange) is a swap of one investment property for another. Although most swaps are taxable as sales, if yours meets the requirements of 1031, you’ll either have no tax or limited tax due at the time of the exchange.

Both Trump and Biden oppose rent control.

The above issues are only two of many real estate / housing policies & issues that both candidates will attempt to implement over the next four years. Make sure to continue to educate yourself on all topics prior to Election Day.

In summary, what the upcoming presidential election has in store for us will certainly impact various facets of the real estate industry. However, the overall outlook for investors looks positive, regardless of the outcome. Both candidates pose ideas with the potential to change the way real estate investors operate, for better or for worse.

To read more about each Candidate’s policies, see some links below.