After the Polls Close – Nov. 4, 2024
Depending on whether you go by offshore oddsmakers, political scientists, opinion polls or those who take the Dodgers’ World Series win as a sign, the outcome of Tuesday’s election either favors one presidential candidate or is too close to call. Going way out on a limb, I’m predicting that a Baby Boomer from a coastal state with a Midwestern running mate will be elected as our next President—a description, of course, that applies to either Donald Trump (born in 1946 as the Baby Boom got underway) or Kamala Harris (born in 1964, the year it ended).
Regardless of who wins that race, not to mention the hundreds of Congressional, state and local races also being decided on Tuesday, the election is likely to have consequences for commercial real estate. A team of Dechert LLP attorneys have put together a report analyzing the implications, based on the stated positions of Trump and Harris. Among its key points are the following:
- Regulatory Environment: Sustainable real estate investments and stricter banking regulations vs. deregulation, which could reduce compliance costs, increase housing supply and pose risks to bank stability.
- Green Energy and Environmental Policies: Continuation of green initiatives which could increase compliance costs but add long-term value growth for sustainable real estate developments vs. the reduction of environmental regulations, increasing short-term profitability but risking ESG non-compliance.
- Labor and Employment Policies: Approval of labor-friendly policies like the PRO Act and federal minimum wage raise and how they could impact real estate.
- Change of Personnel and Leadership: Replacement of key federal figures and potential consequences.
- Regulation on Institutional Ownership: Proposed regulations on institutional ownership of residential properties and what could result.
- Mortgage and Housing Incentives: Increase of the Government-Sponsored Enterprises (GSEs) cap, which could support affordable mortgage/multifamily loans but limit private-label securitizations, vs. approach to privatize the GSEs which could boost lending/securitization volumes but raise homebuyer costs and private label deals.
- Tax and Tariff Policies: Raising vs. reducing the corporate tax rate and what this could mean for the real estate sector.
- Antitrust Policies: A return to fundamental antitrust principles which would provide regulatory certainty and predictability vs. the likely departure of Lina Khan as FTC Chair, which could create a more business-friendly environment with more negotiated settlements and fewer lawsuits.
The Real Estate Roundtable has mapped out its priorities, for both the lame-duck session of Congress post-election and for 2025. They include the following:
- Tax policy: capital formation and capital gains; strong partnership, pass-through and entity choice rules; foreign investment and competitiveness; and affordable housing incentives.
- Energy & climate: including mandates on buildings and disclosure requirements.
- Capital & credit: “RER continues to monitor the looming wave of maturing commercial real estate loans, Basel III Endgame proposals and SEC rules affecting capital formation.”
Fraught as the 2024 election has been, the real work will begin after the polls have closed and newcomers or incumbents take their oaths of office. Groups such as the Roundtable and other national, regional and state-level advocacy organizations will be working tirelessly, simultaneously providing many opportunities for industry members to get involved and help shape policy.
And as for predicting the impact of a new administration on CRE values from a pre-Election Day vantage point? Evan Lustick at Green Street has thoughts. “Estimates of specific policies’ effects on CRE have wide error bars even in hindsight,” he wrote last week. “Forecasting future large-scale policy changes and their effects based on campaign promises is an exercise in futility.”