Affordable Housing and the Candidates: Analysis

Yardi Matrix Research Director Paul Fiorilla takes a deep dive into what the Trump and Biden plans mean for housing policy.
Photo by René DeAnda on Unsplash

Whoever wins the presidential election next week, the multifamily industry will find elements to like and dislike about either candidate’s housing policy.

Former Vice President Joe Biden’s plans call for a huge financial commitment to support tenants, help finance construction of affordable housing and break down zoning barriers to construction of housing—all goals that the multifamily industry has sought for years. However, Biden’s renter protection policies and promise to end tax advantages for real estate are less well received by the industry.

President Trump’s housing policy is almost a mirror image, with the industry giving him high marks for his efforts to incentivize construction through reducing red tape and the tax breaks in the 2017 tax reform bill he signed. But Trump’s policies on affordable housing are otherwise unformed, with no plans to use the government’s purse strings to help.

Affordable housing policy has long been a fringe issue in national political campaigns. Development is mostly controlled at the local and state levels, and the housing issue rarely breaks through the media din that focuses on the daily back-and-forth of politics and not real estate policy.

This year is somewhat different, as housing has been thrust into the spotlight by COVID-19. The closure of many lodging, retail and entertainment businesses left more than 10 million mostly low-wage workers out of jobs and called attention to the long-term lack of housing built for working-class residents.

Comparing Agendas

While housing policy runs a gamut of issues, the discussion of how to solve the problems centers on a handful of areas, including renter subsidies, direct support for development, tenant assistance and protection, regulatory reform and tax policy. Reform of the largest lenders to the multifamily industry, Fannie Mae and Freddie Mac, is also key but on a separate track.

Biden has an ambitious agenda to increase affordable housing and provide renter assistance. Most significantly, Biden’s plan would treat Section 8 vouchers for low-income households as an entitlement, providing vouchers to every household that qualifies.

“This change removes congressional discretion, and at times dysfunction, from the annual funding process for vouchers, which are traditionally funded at one-fourth of the estimated national need on an annual basis,” according to an analysis by the National Multifamily Housing Council. Biden also proposes to expand the Low-Income Housing Tax Credit by $10 billion and create a renter’s tax credit that would help reduce the housing share of household expenses to 30 percent of income.

To increase housing stock, Biden’s platform calls for a $100 billion fund to develop and preserve affordable housing, which would include $65 billion for state housing authorities and $20 billion for a housing trust fund. Biden also proposes to make grants to municipalities through programs such as Community Development Block Grants and Surface Transportation Block Grants contingent on adopting housing policies that would encourage development of affordable housing.

So far as it encourages development and subsidizes tenants, the multifamily industry is on board with Biden’s plans. However, there are elements of his approach that industry trade groups oppose, such as eviction protection, disparate impact and tax policy. Biden’s platform calls for legal assistance to renters facing eviction; strengthening HUD’s Disparate Impact Rule, the provision that monitors resident screening and apartment operations; and requiring communities that get federal funding to monitor housing patterns and identify how policies impact discrimination. Although the industry agrees with aims of the regulations, many oppose the time-consuming and costly mandates that don’t produce the desired outcome.

Taxes and Brass Tacks

Biden’s tax policies include other elements that are unfavorable to commercial real estate. For example, he proposes to eliminate 1031 exchanges, which enable investors to defer paying taxes on capital gains from property sales if the gains are re-invested in a like-kind property. Biden’s plan would also increase the tax on capital gains and would tax unrealized gains on inherited properties.

Paul Fiorilla, Yardi Matrix research director

Trump’s policies are less specific since his campaign didn’t prepare a detailed platform. Based on his record over the last four years and statements made during the campaign, it is clear that his policies trend in the opposite direction as Biden’s. Trump would retain the tax provisions that Biden might strike down, since they were part of his signature first-term legislation, the tax bill passed at the end of 2017. The administration says it will incentivize development through expanded use of the Opportunity Zone tax break on development in designated low-income areas.

Trump has not proposed new funding for housing or renter assistance and has tried to reduce the regulatory impositions on businesses. His administration suspended the Obama administration’s fair housing regulations that required municipalities to examine housing patterns for discrimination. Early in his tenure, Trump established a task force to examine regulatory barriers to development chaired by HUD Secretary Ben Carson, but during the campaign has attacked the premise of increased density and talked repeatedly about preserving suburbs from low-income housing.

Cindy Chetti, senior vice president of government affairs for the NMHC, said she was “encouraged” by the increased funding mechanisms in Biden’s plan and his nod toward reducing barriers to development at the state and local level.  “At the same time, a number of the proposals included in his tax plan are concerning, such as the elimination of the 1031 exchange, increases rates on individual and pass-through and capital gains, which were hard-fought battles during the 2017 tax reform bill,” Chetti said.

“President Trump has made regulatory reform and infrastructure a priority for his administration. If (he is) reelected, NMHC looks forward to working with his administration on ways to address housing affordability (and) ensuring that housing is an integral part of an infrastructure package.”

Congress’ To-Do List

Before either candidate addresses any long-term housing issue, the first order of business after the election (or for the new Congress) is likely to be a stimulus package. Congress in the spring passed $600 per week additional unemployment aid that helped renters to make monthly payments. Rent payments of institutionally managed apartments are only about 2 to 3 percentage points behind normal levels, thanks to the expanded payments, but the aid expired at the end of July. The House of Representatives passed a bill months ago to extend the extra payments as part of a $2.2 trillion package, but the Senate has yet to consider the legislation.

The fight over stimulus demonstrates how the president’s ability to implement policies will depend to a large degree on the composition of the next Congress. Without control over both the House and Senate, it is doubtful that either Trump or Biden will be able to accomplish much in the way of new policy. The House is expected to remain in the Democrats’ hands, so a Trump win would retain the status quo in that chamber, no matter which party controls the Senate. A Biden win, combined with Democrats taking the reins of the Senate, would create the scenario for sweeping change to housing policy.

“Overall, regardless of which candidate is elected, NMHC will continue to make the case against the enactment of eviction moratoriums as a solution to our housing challenges during COVID and beyond,” Chetti said. “Instead, Congress must enact emergency rental assistance for renters and property owners alike who have been impacted by the COVID pandemic.”