Every election cycle there’s a question about how the new administration will address the housing situation in this country. Some leaders lean toward making it easier for investors to increase their profit margins and others lean toward making homeownership more affordable for everyday Americans.
The immediate future of the housing market largely depends on the outcome of the 2020 election and who ends up in the White House.
This administration is concentrating on rolling back the desegregation policies of the Obama administration because the current rule, according to the secretary of housing and urban development, Ben Carson, “ is actually suffocating investment in our most distressed neighborhoods that need our investment most”. The Trump administration’s position is that this will increase the protection of the 30-year mortgage and support affordable housing.
Some housing advocates disagree and project that the proposals will actually raise mortgage rates and make it harder for potential homebuyers to get approved for mortgages. For investors, this means they won’t have as much competition from end-users when it comes to purchasing residential real estate.
On the other hand, if it’s harder for end-users to get mortgages, investors trying to flip properties will have a harder time selling their inventory. This results in higher holding costs and more price negotiating to get properties off their books.
At the other end of the spectrum, the Progressive wing of the Democratic party with Bernie Sanders and Elizabeth Warren at its helm proposes “fair housing for all”. Sanders’ official website states that when he is president he will create a first-time homebuyer assistance program that includes investing $2 billion at the USDA and another $6 billion at HUD.
Sanders proposes to end predatory lending and redlining by ensuring that all mortgage language is clear, states the risks, and avoids fine print. He is in favor of federal down payment assistance and for giving a tax incentive to investors in distressed neighborhoods according to a New York Times survey.
This should be attractive to real estate investors who buy, renovate, and flip houses. The disadvantage may be that with investor tax incentives there will be more investors in the market driving the price of rehab houses up. If mortgages are accessible to almost everyone, end-users will have plenty of housing choices, and that could create a buyer’s market.
Biden represents the more centrist faction of the Democratic Party. His plan will cost $640 billion and includes a Homeowner and Renter Bill of Rights. Biden proposes a $15,000 refundable tax credit for first-time homebuyers to offset the cost of down payment and closing. He would also extend housing benefits for public service workers like first responders and teachers.
Encouraging homeownership with tax credits and extended benefits seems like a win for both buyer and investor/seller. It should make the market competitive for both parties.
“People vote with their pocketbooks, and you don’t get a bigger pocketbook issue than housing” according to Danielle Hale, the chief economist at Realtor.com. It remains to be seen what the voters decide, which candidate prevails, and what, if anything, comes of their housing proposals.