Multifamily and the 2020 Candidates: An Election Guide – Part III

Since our second post, the Democratic field has lost Elizabeth Warren, and narrowed to two major candidates. Though Bernie Sanders remains in the race, former vice president Joe Biden has emerged as the frontrunner, with near-universal endorsements by the slate of former Democratic candidates. Biden has also released a housing plan, something he had not done when we published our first blog post about the Democratic candidates. 

In the wake of the current COVID-19 pandemic and the economic uncertainty that has resulted, globally and at home, the housing policies of not only the democratic candidates but President Trump, as well, are more relevant than ever. Scroll down to read about Biden’s newly released plan, the Trump administration’s proposed policies, and more. 

Joe Biden 

Since we began covering the election, Joe Biden has emerged as the Democratic frontrunner. Prior to the recent release of a formal policy, Biden had made several statements about housing, committing to rendering it more affordable to help the middle class, but with no specificity. South Carolina was set to be a crucial state for the Biden campaign, a state where affordable housing is a major issue with democratic voters, and so several days before the primary the campaign released a $640 billion proposal, including a $100 billion fund to build affordable homes and to upgrade and repair existing housing stock, $13 billion to fight homelessness, and $5 billion a year to subsidize housing costs for Americans who make too much to qualify for Section 8 housing.

Biden’s housing policies incorporate many of the promises made by the now suspended campaigns of other moderate Democratic candidates, including a pledge to end redlining. Biden placed first in every county in South Carolina, crushing his competition, and walked away with 39 of the 54 delegates in play, with Bernie Sanders securing the remaining 15. Immediately after the primary South Bend, IN, Mayor Pete Buttigieg and Minnesota Senator Amy Klobuchar dropped out of the race and threw their endorsements behind Biden. 

Biden’s lack of focus on housing stands in stark contrast with Bernie Sanders, his lone remaining competitor. The Vermont senator intends to spend $1.5 trillion on constructing and improving housing and proposes nationwide rent control. While Sanders proposals writ large stand little chance of passage, they would engender a major disruption to the multifamily space, with ramifications impossible to foretell. A Biden presidency, on the other hand, would likely have little impact on the housing market.  

Of course, COVID-19 and the economic fallout places a major caveat on all of this. If Biden wins the presidency and the United States has not fully dealt with the current crisis, he may take extraordinary measures to deal with the virus’ impact. As he stated in a town hall with Anderson Cooper, were he president now, Biden would have instituted rent increase freezes and the extended suspension of foreclosures and evictions. These actions would have implications for investors and may lead to longer hold periods, lower than normal transaction volume, and other consequences. As with everything else in these uncertain times, only time will tell. 

Donald Trump 

Before the serious onset of the COVID-19 in the United States, the Trump administration mostly influenced housing policy using two levers: creating tax and zoning incentives for developers, owners, and builders, and reshaping old laws and programs passed or created under previous administrations.

The ongoing Opportunity Zones program represents one example of new tax incentives. Though not restricted to real estate interests, a number of funds have pumped money into the areas designated by the program as “zones” in need of capital investment. Investments result in substantial tax savings, which investors receive after ten years of investment. Debate continues about whether these programs have in fact caused an increase in housing available to those in the zones, but the idea represents the core of Trump-era housing policy. 

Opportunity Zones were introduced as part of the Tax Cuts and Jobs Act of 2017, but the administration has introduced other programs more recently. In mid-2019, Trump and HUD director Ben Carson introduced the White House Council on Eliminating Barriers to Affordable Housing Development. Little reporting on the Council has occurred since its introduction, but it aims to eliminate restrictive zoning, such as parking and energy efficiency requirements. It also seeks to shorten lengthy permitting procedures and labor laws that the committee asserts constrict construction pipelines. These efforts by the council will mostly be a boon for developers, but should lead to a friendlier environment for all multifamily operators.

Lastly, Trump and his administration have ordered an overhaul of Fannie Mae and Freddie Mac, the government-sponsored enterprises that act as liquidity providers to the housing industry. Though none of the changes have taken effect, a  tentative plan released in late 2019 suggests ending government ownership and changes to lending parameters for affordable housing. Privatizing the GSEs would mean profound changes for the multifamily industry, although without a fully-fledged plan the full extent of those implications remains uncertain. Given opposition by Republicans to the current plan for privatization and Democratic opposition to their privatization at all, Trump would almost certainly need another four years to pass these policies. If Trump were to win in November, expect privatization efforts to push forward, but their success is far from guaranteed. 

Of course, all these actions have seen their relevancy decrease over the last month. Facing COVID-19 and its human and economic toll—a crisis without precedent in living memory—the Trump administration, dozens of states and hundreds of municipalities have instituted measures to suspend evictions and foreclosures. Widespread unemployment, a slowdown in home sales, and the temporary suspension of most construction will have unpredictable effects on the single and multifamily housing markets. How the Trump administration will address this crisis when the various temporary eviction and foreclosure reprieves expire remains up in the air. The recently-passed stimulus package, with $1,200 for most Americans and extended unemployment benefits, will provide some additional relief, but for many households it may not be enough to pay their full rent. How local and institutional investors will deal with a month or several months of mortgage payments with limited or no rental income remains unknown. If Trump does win reelection, plans to address the ongoing economic fallout probably won’t resemble typical Republican tactics, and instead might take the form of Keynesian injections of capital like the $2 trillion in spending approved in late March.

This is the third in our series examining the housing plans of all the major presidential candidates and their impact on the multifamily industry. If you would like to receive these insights straight to your inbox, sign up below. In the meantime, stay tuned for our ongoing coverage!

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