How the 2016 U.S. Presidential Election Might Change Real Estate Finance
No matter who wins the 2016 U.S. presidential election, the history books will be stuffed full of exciting firsts. This is the first time we’ve ever had a woman as one of the major two-party candidates, and as such, if Clinton wins, she’d be America’s first female president. On the flip side, this is also the first time a candidate has owned casinos and hotels and, if he wins, Trump would be the first president in over 60 years with no experience as either governor or in Congress.
While history books will be satisfied with the addition of either Clinton or Trump into the White House, real estate investors might not be as excited by the changes that either candidate will usher in.
Immigration Reform and Its Impact on Real Estate
One of the biggest issues this election season has been the discussion surrounding immigration reform. While one candidate is focused on building walls and tightening immigration standards, the other is encouraging deportation relief and the development of more ways to gain citizenship.
For real estate investors, both those focused on multifamily property ownership and resale, immigration can bring a huge influx of business opportunities. As New York Daily News reported in 2014, anyone with money—including undocumented immigrants and visitors—can buy real estate in the United States. In some cases, especially if they have a higher down payment, undocumented immigrants may even be able to secure bank lending to buy a home by using an individual taxpayer identification number (ITIN). In 2016 CBS News reported that a third of all undocumented families owned a home in the U.S. and in some states, such as Idaho, that number was closer to 50 percent. Those who don’t own a home rent an apartment or other living space, helping rental property owners reduce the number of unoccupied units they maintain.
It’s possible that further restricting the arrival of documented and undocumented immigrants may have some negative impact on the real estate industry. And while immigration reform can benefit other industries, it’s not clear that real estate won’t suffer as a result of stricter standards and higher rates of deportation.
To Lighten or Tighten Regulations
The post-Great Recession economy has been a difficult place for many lenders. With increased regulation, scrutiny and enforcement, the Dodd-Frank Act and the introduction of the Consumer Protection Finance Bureau, lenders have had to revise underwriting standards and adhere to tighter capital requirements. Worse, access to federally backed loans became very limited for borrowers with low credit scores and small down payments and FHA loans became more expensive.
If Clinton is elected, we’re not likely to see that environment change. Democrats are highly focused on further regulatory oversight, ensuring that income disparities are partially addressed through the further use of federal initiatives including grants, down-payment matches and support for building affordable rental units through low-income housing tax credits.
Trump’s plan, on the other hand, is far friendlier to the possibility of dismantling Dodd-Frank and a loosened regulatory environment. Further, the Republican platform itself is looking toward the possibility of fewer regulatory requirements regarding minorities and low-income housing subsidies, ensuring that the market has the freedom it needs to create its own solutions.
Either plan can be beneficial to the real estate sector, albeit in different ways. A looser regulatory environment can help increase the number of loans that are approved and, as a result, the amount of properties purchased. With fewer subsidies and house-buying assistance, we could have a stronger real estate economy and less likelihood of another housing crisis brought on by homeowners who are unable to continue making payments.
On the other hand, initiatives such as the low-income housing tax credits have put millions of homes and apartments on the market for low-income families. According to the U.S. Department of Housing and Urban Development, more than 2.5 million units were created between 1987 and 2014 thanks to the credit. Likewise, grant programs such as the Neighborhood Stabilization Program, often help minorities and low-income families buy homes they otherwise couldn’t, which essentially opens up a new market for real estate sellers and flippers.
No matter who is elected president, it’s important to remember that ours is a system of checks and balances. Many of the sweeping reforms each candidate wants to introduce can be prevented by Congress. Either way, it’s our job to figure out how to adapt no matter who wins.
Sidebar: Historical Impact of Elections on Home Prices
While it’s impossible to predict the impact this year’s election will have, what with such differing candidates, we can look at past election seasons to get an idea of what to expect. To do that, we pulled two studies—one conducted by British researchers in 2014 and published in the British Journal of Political Science, and one conducted by real estate site Movoto in 2012.
British Journal of Political Science Study
In this study, researchers looked at trends during gubernatorial election years and nonelection years in 35 states from 1999 to 2006. During the years with an election, home sales were down as much as 0.3 of a percent.
In their 2012 study, Movoto used data obtained from the California Association of Realtors. They found that it’s not just the months or years prior to the presidential election that affect home prices, but the time before, during and after an election also demonstrates some variance. They found that during an election year, home prices only rose by 4.5 percent, whereas they rose by 6 percent the year before an election and 5.3 percent the year after an election.