What a Joe Biden Presidency means for real estate

As with every new President in the White House, Joe Biden was welcomed by people all over the world with a great deal of expectations. Much has already been said about his victory and the kind of impact it will have on various sectors of the economy. For the real estate industry, it could have far-reaching consequences, with several of Biden’s policies and tax reforms already catching the attention of industry experts. Here’s a look at some of the near and long term changes in the property industry we could expect under Biden’s presidency.

Buying a home could become more affordable

One of the highlights of Biden’s policies is the housing plan, where he plans to introduce a tax credit of $15,000 for first-time homebuyers(1). This could create an increase in demand for residential properties while also helping a lot of families to buy their homes more affordably. Apart from the plan for the buyers, Biden also proposes a renter’s tax credit to cut down rent and utilities by up to 30% for low-earning tenants. This can help tenants keep up with their rental payments without fail, promising a rather steady income for landlords, making for a win-win for all parties.

It might be the end of 1031 exchanges

Joe Biden could put an end to the Section 1031 like-kind exchange(2), commonly known as the “1031 exchange”, which allowed investors to swap one piece of property for another, without paying capital gains taxes. While the former President offered a lot of tax breaks for real estate investors, Biden’s plans seem to be not-so-friendly towards investors. Getting rid of 1031 exchanges might disrupt a lot of local property markets, likely causing a decrease in commercial real estate prices and bringing down reinvestment in properties. It could also extend the investment holding periods which can decrease the market liquidity and slowdown the economy.

More funding to improve the cities

The President-elect is expected to introduce a federal stimulus package to reform the cities that are hit hard by the pandemic. Post the elections, there has been a considerable increase in the real estate activity in New York City and other areas. This is certainly a promising sign for the commercial real estate market, however, the road to better industry growth lies in combating the immediate problem by putting the pandemic in focus. If Biden can turn things around with better efforts to curb the virus, it could prevent a lot of struggling businesses from closing down.

The tax-law changes that Biden intends to bring about will require new legislations passed, and that would depend ultimately on what the Congress and Senate decide. Overall, the President’s policies look to hold a lot of positives for the average citizen and not so much for wealthy investors. That said, we still need to wait and see how things pan out. Tax burdens could potentially skyrocket for large scale investors, but at the same time, Biden’s affordable housing funds is a great step towards supporting the Americans who lack access to quality housing.

  1. https://www.taxpolicycenter.org/taxvox/bidens-first-time-homebuyer-tax-credit-big-improvement-over-mortgage-interest-deduction
  2. https://thediwire.com/biden-proposal-calls-for-elimination-of-1031-exchanges/  

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