What will happen to the property market under Trump’s housing policies?
The U.S. government touches the lives of nearly everyone living within its borders. Therefore, when a key position — like the current sitting president — changes, people pay attention.
The relationship between the U.S. federal government and lower-level authorities is pivotal in shaping how policies are implemented and how services are delivered. Naturally, the enormous influence of the federal government on daily life has many asking: As the incoming Trump administration prepares to hit the ground running, what does the future look like for state and local governments?
With each new presidential administration comes a shift in priorities, resources, and regulations, all of which trickle down to impact state and local governments.
In the property industry, those changes will range across touch points, including:
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A Republican-Controlled Government Will Influence Trump Policy Agenda
Given the Republican Party’s control in each of the major branches of government at the federal level, a move towards deregulation is likely to be at the center of policymaking for the next four years.
The House of Representatives, the Senate, and the White House, are all controlled by Republican lawmakers. History would suggest this makeup would lead to a paring down of federal responsibilities as part of a broader deregulatory agenda aimed at reducing federal costs and returning certain decision-making and administrative roles back to the state and/or local level.
While this increased authority for state and local governments could lead to innovative policies and regulatory reform, an expected reduction in federal funding for programs supported by the Biden Administration could also shoulder state and local governments with higher operating costs.
To understand the potential policy outcomes that the next administration may bring, let’s look at four major categories that touch the property market.
Housing Initiatives
Before Trump was president-elect, many wondered what would happen to the housing market if Trump won. While the Trump campaign highlighted a number of issues tangential to the housing industry — including the mass deportation of immigrants and tariffs on imports like Canadian lumber — the rhetoric did not go deep into detail on housing-specific policies. However, there are some areas we can expect to see immediate action that would affect, or require the cooperation of, state and local governments:
Federal Lands
To alleviate the current shortage of available homes across the country, both the incoming and outgoing administrations have proposed selling federal lands for housing-specific purposes. This could be a very promising endeavor, provided the federal government is able to do two things:
1. Identify the specific parcels of land that are most ripe for development so as not to waste resources trying to develop unsuitable land.
2. Develop a working relationship with the state and local governments that will ultimately be responsible for overseeing these new developments.
Deregulation
President-elect Trump made deregulation (across all industries) a central theme of his campaign, but implementing such policies might take a little more time in the housing industry since the majority of regulations affecting housing come from state and local governments.
That said, the federal government can roll-back certain requirements — as was the case when President Trump rescinded the Affirmatively Furthering Fair Housing rule during his first administration — or otherwise provide incentives for state and local governments to enact zoning reform.
Opportunity Zones
Created as part of the 2017 Tax Cuts & Jobs Act passed during the first Trump Administration, Opportunity Zones have been used to direct private investment into economically-distressed communities.
While the first five years of the program’s existence have had middling results, there have been bright spots for multifamily housing development. Also, there is a general belief that further changes to the program could unlock additional investment that could be used to address our nation’s housing supply crisis.
Tackling the housing supply crisis will almost certainly be a priority for Scott Turner, who oversaw the creation of Opportunity Zones during the first Trump Administration and who has been nominated to serve as Secretary of Housing and Urban Development in the coming administration.
Emergency Management
Natural disasters — whether hurricanes, wildfires, floods, or earthquakes — require a coordinated response across federal, state, and local governments. Under the new administration, state and local leaders could see changes in how the federal government distributes disaster relief.
Project 2025, a conservative policy roadmap created by the Heritage Foundation, calls for the following changes, which would directly affect the U.S. emergency management response.
- National Oceanic and Atmospheric Administration (NOAA) should be broken up and downsized.
- Federal Emergency Management Agency (FEMA) should be scaled down and made into a lean organization.
- Much of the financial burden for disaster recovery should be shifted to state and local governments.
While the incoming President has distanced himself from Project 2025, many of its authors are receiving appointments within his second administration. So, it’s likely these ideas will, at the very least, garner some discussion.
Inflation Reduction Act (IRA) Funding
Perhaps one of the most notable accomplishments during the Biden Administration was the passage of the Inflation Reduction Act, which mobilized billions of dollars of investment into economically-struggling communities.
Now many are wondering what a Trump Inflation Reduction Act may look like.
On the campaign trail, President-elect Trump stated he wants to rescind all unspent funds under the IRA. However, he may have a difficult time doing so, as the majority of projects, investments, and jobs created under the IRA are in Republican congressional districts, with many Republican officials now asking to preserve certain aspects of the law. Instead, we could see the Trump Administration remove regulations attached to the funding (such as clean energy requirements) to provide state and local recipients with more freedom to use the funds as they see fit.
State & Local Taxes
As part of his campaign promise to lower taxes, President-elect Trump has pledged to repeal the $10,000 cap on state and local tax (SALT) deductions that he signed into law as part of the previously-mentioned 2017 Tax Cuts and Jobs Act. Research has shown that the cap had a negative effect on home prices in high-SALT counties — these are areas where the average SALT deductions claimed in 2017 were greater than $10,000. In the case of this tax cap, a repeal would require no action. The cap is set to lapse at the end of 2025.
While these outcomes from the incoming Trump administration are speculative, it can be assumed that President-elect Trump will continue most of the agenda he set forward during his previous term. In fact, his previous tenure in the White House is what provides a significant amount of data for these hypotheses. As the government continues to form and Trump continues to announce his administrative picks, there are still a number of questions about what the next four years will hold.
We will track the changes and help you understand what they mean for the property market. Stay tuned as we continue to follow his announcements and implementations post-inauguration.
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Written by: Russell McIntyre