Fewer Regulations, More Need Await Multifamily Developers In New Trump Era

Housing affordability and availability are among the top priorities for many Americans, and after last week’s election of Donald Trump back to the highest office in the land, many in the housing development world anticipate swift, meaningful action in the form of reduced regulations and increased land availability.

Trump’s first presidency and his campaign promises offer a road map for where he might go, aided by a Republican-majority Senate. But times have changed dramatically from Trump’s first turn through the Oval Office, with a starkly different economy injecting a degree of uncertainty around what changes could come to housing in a new Trump term.

“The debt and deficit realities are different,” Mortgage Bankers Association Senior Vice President for Legislative and Political Affairs Bill Killmer said. “The interest rate environment is different. The way the capital markets are reacting to the potential for a growing debt load and deficit is different … I think there’s a lot at stake in this debate for multifamily.” 

The federal government and presidents are somewhat limited in what they can do to influence housing supply and pricing, which are historically a local issue. But through legislation, executive action and the bully pulpit, presidents can make change, and a friendly Congress can go a long way. 

And some ideas that previously spooked landlords are fully off the table in a Trump presidency.

“You don't have to worry about federal rent control anymore, or the talk of it,” TruAmerica Multifamily CEO Bob Hart said in a statement. He expects the new Trump presidency to have "a less harsh regulatory climate coupled with reduction of predatory [Department of Justice] initiatives.” 

More specifically, Hart expects DOJ pursuits of rent-setting software, such as that offered by RealPage, would also be a thing of the past once the Trump administration was in the White House. 

“It’ll be more of a return to an open business climate,” he said. 

Federal regulations, which some owners and developers have bemoaned in recent years for adding to their costs, are also expected to be rolled back in the sustainability arena. 

Improving energy efficiency is laudable, said Mortgage Bankers Association Senior Vice President for Legislative and Political Affairs Bill Killmer, but implementing those codes could be pricey when the cost of creating housing needs to be reduced. 

Others expect that a second Trump term will have positive implications for the Opportunity Zone program, which was created by the 2017 Tax Cuts And Jobs Act in Trump’s first administration. The OZ, slated to sunset in 2026, saw a dropoff in investment this year, but Trump’s return is expected to spur renewed interest.

“I think we can count on Opportunity Zones being a big priority for the new Trump administration,” Novogradac & Co. Director of Public Policy and Government Relations Peter Lawrence said. 

Novogradac tracks a segment of OZ investment and has found that nearly 200,000 rental homes have been financed through that portion of the OZ program, which reflects roughly one-quarter to one-third of the total.

The majority control Republicans have of Congress and the White House are ideal conditions for them to use the reconciliation process to begin to lay out how they want to extend the parts of the Tax Cuts and Jobs Act that are going to expire, Killmer said.

The reconciliation process is a 50-year-old legislative process that Congress can use to fast-track “high-priority fiscal legislation” during the budget resolution process, according to the Center for Budget and Policy priorities.   

Given that the last two tax reform debates targeted 1031 exchanges and carried interest tax breaks, Killmer expects to see those elements up for debate again, along with the business interest deduction, which allows business owners to deduct interest on certain loans, including mortgages and operating loans, as a business expense.

“All those things, even though you might think they’re less at risk with Republicans running the debate, this is a really different environment than 2017,” Killmer said. 

Although some in the multifamily world are looking forward to the changes Trump is likely to make, those in the affordable housing sphere are apprehensive, pointing to his previous efforts to cut funding for public housing and housing vouchers.

But the fact that those cuts did not succeed, coupled with the increased focus on housing affordability at a national level, gives hope to those watching the sector that strides will be made on the income-restricted front. 

“The bottom line is that Americans are really struggling with a massive affordable housing shortage and sky-high prices that are directly affecting their well-being, and so you will see that play out in the policies and opportunities as Congress comes back,” Enterprise Community Partners Senior Director of Policy Advocacy Ayrianne Parks said. 

One common method used to help expand the stock of income-restricted affordable housing is through the Low Income Housing Tax Credit. Recent attempts to expand the program have been embraced on both sides of the aisle. 

With the anticipation that significant tax legislation is on the way, Parks says her focus is on making sure these programs, which are critical to helping renters with the largest challenges to finding affordable housing, are top of mind for both houses of Congress.

She anticipates challenges, including a repeat of a presidential move to cut funding for public housing, but knows there is broad bipartisan support for increasing options for those struggling to pay their rents. 

“I don't think there is a member of Congress, really, who doesn't understand that we have a housing supply shortage,” Parks said.