What Impact Could the Election Have on Housing?

As the U.S. approaches another election cycle, the housing market has become a focal point of discussion, although analysts indicate that the federal government’s influence over housing policy may be limited.

According to UBS, actual decision-making power regarding housing remains with state and local governments. Key aspects such as zoning, permitting, and land-use regulations crucial for new housing development fall under their control.

While federal candidates express concerns about the ongoing housing crisis, any significant policy changes are expected to originate at the local and state levels, especially in coastal regions where affordability is a more urgent issue.

At the national level, one area where the federal government could exert some influence is through tax incentives. Analysts note that proposals for expanding tax credits, such as the low-income housing tax credit for builders, have been suggested as means to tackle the affordable housing shortage.

Vice President Kamala Harris has particularly emphasized the need to increase housing supply, advocating for a $25,000 tax credit for first-time homebuyers. However, such proposals may encounter considerable challenges.

These tax incentives would require approval from Congress, and with a likely divided government—according to UBS’s analysis—passing major housing legislation is expected to be difficult.

In contrast, former President Donald Trump has focused on minimizing regulatory barriers to housing construction. He has called for the release of federal land for housing development, particularly in the Southwest and across the Western U.S. While this could stimulate new housing projects, state and local opposition could impede or delay progress.

Additionally, Trump’s housing approach emphasizes states’ rights, prioritizing local control over zoning and permitting.

Even if federal housing policies were implemented, they would still face challenges locally. For instance, if federal tax credits for affordable housing were expanded, local governments would still need to authorize projects through their zoning and permitting processes.

Furthermore, construction costs could be impacted by labor shortages, particularly if stricter immigration policies are enforced, which might drive up the costs for building new homes.

The implications of these policies also raise questions about their effects on real estate investment trusts (REITs). Analysts from UBS suggest that the most significant impacts are likely to be experienced by REITs with substantial exposure to coastal markets.

Conversely, REITs with more diverse or inland portfolios may not feel immediate effects from changes in federal policy.

Concerns surrounding national rent control do not seem to represent a significant risk at this time. While there have been talks of rent caps linked to tax benefits or financing restrictions related to government-sponsored entities, broad national rent control is considered unlikely due to the complexity of enacting such policies through Congress.

Examining broader policy differences, Harris has consistently advocated for expanding housing supply through increased multifamily and single-family construction, whereas Trump has concentrated on reducing regulatory burdens. However, the effectiveness of these plans may be constrained without substantial congressional support, particularly in a divided government scenario.

Additionally, analysts point to the potential impact of tariffs on housing. Should Trump win and maintain a hardline trade approach, particularly against China, new tariffs could raise the costs of building materials, leading to increased housing prices and potentially delaying new construction.

Higher tariffs could have broad inflationary effects, further exacerbating affordability issues for many Americans.

Lastly, the future of Fannie Mae and Freddie Mac could also significantly affect the housing market. Trump has expressed support for privatizing these government-sponsored entities, a move that might increase financing costs and decrease housing affordability. Like many policy proposals, this would require legislative action and could face significant hurdles.