As America completes its election cycle, those in the real estate rental and investment business are wondering how a Joseph (Joe) Biden Presidency will affect their business.
Mashvisor took a close look at the short, medium, and long-term impacts of this change in policy direction from the prior administration. Here are our findings.
Biden Presidency and Real Estate Investing – The First 100 Days
Joe Biden will be sworn in as President on Wednesday, January 20th, 2021. It is a tradition in America for a newly-elected candidate to lay out his or her policy priorities before taking office. The 100-day plan, as it is often called, addresses the most pressing changes that the President-elect feels need to be implemented without delay. Typically, these involve areas where the President can make policy. In other words, not laws but executive actions. We read all we could find on Joe Biden’s 100-day plan and could find no mention of housing policy, real estate, or real estate investing.
That certainly does not mean that the changes coming from the Biden administration won’t have an impact on the real estate investing industry. Many aspects of President Biden’s 100-Day plan and beyond will have a direct impact on how real estate investors conduct the business of housing a huge percentage of America’s population. However, with the COVID-19 pandemic legislation being the most pressing issue, housing will wait. President-elect Joe Biden’s stated goal of reversing many of the Trump administration’s immigration policies will also take time away from housing legislation.
As we lay out our findings here, keep two things in mind. First, the legislature holds the power of the purse in America, not the President. The U.S. Constitution dictates this in Article 1, section 7, clause 1. Funding starts in the House of Representatives, and the combined Senate and House create spending bills that the President then signs or vetos. Without the Presidency, Congress can create funding and spending laws with enough votes to override a bill’s veto. That is very unlikely given the nearly 50-50 split of today’s American Congress.
Joe Biden’s Housing Plan
President-elect Joe Biden has a comprehensive plan for expanding affordable access to housing for many segments of society. Specifically, low-earners, minorities, convicted felons, veterans, first responders, and educators. The plan breaks down into the following set of principles laid out by President-elect Biden in The Joe Biden Plan For Investing In our Communities Through Housing policy statement. Spending in the area of a hundred billion dollars is planned.
The Biden Principles For Housing are as follows:
- Affordable – taking up no more than 30% of income so they have money left over to meet other needs;
- Stable – providing families with the consistency they need to maintain jobs, perform well in school, and develop social networks necessary for well-being;
- Safe and healthy – protecting families from environmental and social risks from polluted air to lead contamination to gun violence;
- Accessible – meeting the needs of individuals with disabilities so they can live in their communities;
- Energy efficient and resilient – reducing our greenhouse gas emissions and withstanding the impacts of climate change; and
- Located near good schools and with a reasonable commute to their jobs.
Affordable Housing for Low-Income Earners and Other Specific Groups
One area that the Joe Biden plan focuses on closely is expanding affordable housing. The Joe Biden plan defines affordable as “30% of income.” The plan does not specify if that is total household income, total housing unit income, or a single wage earner’s income. The plan states, “…no one has to pay more than 30% of their income for rental housing.”
In addition to low wage earners, some specific groups are mentioned by name by President-elect Joe Biden for inclusion in more accessible housing. “Black and Latino families…” are one specific group mentioned. “Military families” are another. LGBTQ teenagers, seniors and individuals with disabilities, the elderly, formerly incarcerated individuals, survivors of domestic and sexual violence, first-responders, public school educators (but not private school educators), and other public and national service workers are all specifically mentioned in the Biden plan for expanded housing access.
The Joe Biden plan also includes a $100 billion Affordable Housing Fund to construct and upgrade affordable housing. The money will be distributed to those communities that meet certain other goals, such as climate change reduction and reducing urban sprawl.
Section 8 Housing Expansion
One specific area landlords should expect to see expand is Section 8 rental subsidies. The Joe Biden plan states that “roughly three in four households eligible for Section 8 rental assistance do not receive housing assistance because the program is underfunded.” Biden’s plan will be to fund the program entirely and expand the program to 17 million homes over time. The plan also includes a provision to make it illegal to discriminate against a tenant receiving the assistance just as it is already in many states, such as Massachusetts.
Expanded Renters Rights
Landlords should also expect an expansion of what the Biden plan calls “renters rights.” The current eviction moratorium will come and go but expect it to be replaced with new regulations making eviction for nonpayment of rent very difficult. Of course, if such policies are implemented, they could lead to the issue of unpaid income taxes by a rental property LLC holder or unpaid property taxes. And it’s unclear how the government or state officials will handle such issues that are likely to arise. We suspect property liens might be one reaction.
Single-Family Home Ownership
The Joe Biden plan mentions expanding access to single-family homes for more Americans many times. The plan is to offer various tax credits and fiscal policy support to families so they can purchase a first home with low mortgage rates and without having to have their own down payment. Should this plan succeed, one might safely assume that rental units would be less desirable for many who have the option to instead own using taxpayer financial support. One outcome of COVID could be a 2021 single-family housing market crash. But it’s possible the Joe Biden plan will have ways to offset this.
President Joe Biden Timelines
Those watching for changes to the current real estate investing industry norms should consider the following timelines. First up is the 100-day time window. If the Senate remains in control of the Republican Party, this time window will be moot in large part. Two run-off elections in Georgia will determine if the Senate shifts to Democratic control.
If the Senate remains under the control of the Republican caucus, the next timeline is January of 2023 when the Senate and House will again have election changes to the makeup of the two chambers. At this point, the presidency will again hinge in large part on who controls the ability to make legislative changes. Following that, Biden will run for re-election, assuming the then 81-year-old Biden opts to run for a second term. If he opts to do so, Biden would be the oldest President to ever run for a second term. By contrast, Ronald Reagan was just 73 when he entered his second term and 77 years and 349 days old when he completed it.
As America welcomes its 46th President, it is clear that the federal government plans to focus and make strides in terms of affordable housing. Expanded renters’ rights, a massive expansion of Section 8, and more government-subsidized single-family homes are all part of the Biden Plan. How much of that plan will come to pass hinges in large part on the January 5th outcomes of the Georgia Senate races.
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