It’s a wild understatement to say there’s a lot at stake in the nation’s highly contentious, upcoming presidential election: the future handling of COVID-19, the battered economy, race relations, immigration, climate change—oh, and let’s not forget the composition of the U.S. Supreme Court.
One key issue that’s received considerably less attention in this knock-down, drag-out season is housing. But make no mistake: At a time when the U.S. is in the throes of a historic shortage of affordably priced rentals and homes for sale, the manner in which each candidate would approach America’s housing crisis could affect the country for many years to come.
And the candidates couldn’t be further apart on how to address the housing challenges.
So with the Democratic National Convention beginning this week followed by the Republican National Convention next week, it seemed as good a time as any to take a close look at how each candidate could leave his mark on the U.S. housing markets.
President Donald Trump made news recently for issuing a controversial eviction moratorium to prevent renters from losing their homes during the coronavirus pandemic, and also scrapping a law that required suburbs to address racial discrimination in housing. He also hopes to privatize Fannie Mae and Freddie Mac, which could affect generations of future home buyers.
Meanwhile his challenger, former Vice President Joe Biden, has outlined an ambitious plan that would help first-time buyers scrape together down payments to purchase their own homes. The presidential contender would also take steps to ameliorate racial disparities in the housing market and provide more rental assistance for the poorest Americans.
“When voters make a decision in November, the choices are largely preserving the status quo in the housing market versus expanding opportunities for minorities, low-income and lower middle-class households,” says realtor.com®’s chief economist, Danielle Hale.
So which candidate should get your vote when it comes to real estate? Let’s go to the virtual debate stage and check out the housing highlights from each contender!
How would President Donald Trump affect the housing market if he’s reelected?
The leader of the free world and former real estate mogul hasn’t released a specific housing plan. However, Trump has amassed a housing record during his nearly four years in office that provides clues to what his future actions could be.
Is it strong enough to help win him another four years in office?
“In the last four years the homeownership rate has been going up, finally,” says John Weicher, director of the Center for Housing and Financial Markets at the Hudson Institute, a conservative-leaning think tank in Washington, DC. Trump has “recognized the importance of housing. It’s part of his strategy to rebuild the economy in the aftermath of the Great Recession, and it’s paid off.”
However, the president’s recent executive order extending the eviction moratorium was widely panned as toothless. The order came after stimulus talks fell apart in Congress. The problem is it doesn’t seem to actually prevent evictions for the roughly quarter of tenants who would be protected by it. Instead, it instructs the U.S. Department of Health and Human Services and the Centers for Disease Control and Prevention to consider whether pausing them is needed to curb the pandemic.
When it comes to homeownership, one of the Trump’s administration’s boldest plans is its proposal to privatize Fannie Mae and Freddie Mac, which could affect generations of future home buyers. Fannie and Freddie, which back about half of the nation’s mortgages, were moved under federal conservatorship to prevent them from going belly up after the housing bust of the late aughts. In the ensuing years, there’s been a big push to privatize them.
Critics fear the move could endanger the popular 30-year fixed-rate mortgage—a claim the Trump administration has dismissed. But mortgage interest rates and fees could rise as a result of the change.
Another controversial move was the Trump administration’s ending a rule that required many suburban communities to diversify. The President Barack Obama–era regulation forced communities receiving federal housing money to assess and address housing discrimination. The Affirmatively Furthering Fair Housing rule was designed to encourage communities to allow more affordable housing, apartment and condo buildings, and smaller, more affordable single-family houses to go up.
Many wealthier towns and suburbs had fought these requirements fearing they could result in lower property values.
“The rule was one of the main achievements of his predecessor,” says Edward Goetz, an urban policy professor at the University of Minnesota in Minneapolis. “The end result could be that local governments don’t take fair housing as seriously.”
Trump’s tax changes affect real estate
Trump made some big changes toward the beginning of his presidency to the tax code. He created “opportunity zones” to encourage new development and investment in poorer, struggling neighborhoods. Investments, like affordable rental complexes and retail centers, can receive tax incentives as a way to spur development.
The commander in chief also capped property, income, and sales tax deductions at up to $10,000 in total at the end of 2017. This worked out well for many Americans, especially in some Southern and Midwestern states. But it was an unpopular move for homeowners who lost out in the Northeast and other tax-happy states where property taxes alone are often well above the cap.
Trump also lowered the mortgage interest deduction that homeowners take off of their taxes that same year. Homeowners can write off only up to $750,000 of their combined primary and vacation homes. The previous limit was $1 million. While this didn’t affect the majority of homeowners, it hurt the bank balances of those in pricey, coastal areas, such as in New York City and the San Francisco Bay Area, where a modest starter home can cost more than $1 million.
“While many saw their tax bills drop, some, especially upper middle-class homeowners living in high-cost areas, saw their tax bills rise,” says realtor.com’s Hale. “At the time, we saw increased interest in low-tax states like Florida for home shoppers from high-tax states like New York and New Jersey.”
How would Joe Biden make his mark on housing?
The nation’s Democratic hopeful released a detailed housing plan in February. While much of it may be wishful thinking at best—and empty promises at worst—the plan lays out his priorities and how he hopes to make his mark on the housing market.
“With the pandemic and the economic crisis, the affordable housing problems are only going to get worse,” says Goetz. Recessionary conditions could make it tougher to find the money to enact these plans as local and state governments are scrambling for funding.
“The question is how much of this Biden can get through Congress—and how much of it can get funded,” says Goetz.
One of Biden’s most popular planks is to provide first-time home buyers with a down payment tax credit of up to $15,000 they could use to help fund the deal. As home prices have soared in recent years, this could be a big help to many cash-strapped buyers.
However, some worry this proposal could be mistimed.
“His idea of a down payment tax credit is great, but that might not be [the right] proposal for this market,” says Hale. The housing market’s biggest problem today is the dearth of affordably priced homes. “Right now we have too many buyers and not enough homes for sale.”
Meanwhile, teachers, first responders, and other public and national service workers would also be eligible for down payment assistance and lower home prices. However, they would need to buy and move into homes in either struggling, lower-income neighborhoods or pricier communities that don’t offer much more reasonably priced housing.
Biden wants to take on racial discrimination in housing
If elected, Biden has pledged to help fight the racial housing gap that has resulted in lower homeownership rates (and therefore lower household wealth) for communities of color. He’s proposed creating a national standard for appraising homes to make sure properties in communities of colors wouldn’t be assessed at less than similar homes in comparable white neighborhoods.
“It’s intriguing and would likely help equalize the playing field,” says Hale.
In addition, he’s proposed creating a public credit agency that would help raise the scores of minority home buyers by considering things like rental payment histories and utility bills paid on time. This could help more buyers qualify for mortgages with lower fees and rates.
Along similar lines, Biden would offer low-income renters a tax credit designed so they pay only up to 30% of their income on housing and utilities.
Paying no more than a third of their income on housing has “been shown to be effective in keeping people in housing,” Goetz says of the 30% cap. That housing stability has translated into greater job retention as well as students doing better in school.
“Biden is looking at how to increase opportunities for homeownership and affordable rentals,” adds Hale. “[His plan] is targeted at the people who need the most help.”