The upcoming election is a hot topic across the country. Over the last few weeks, I’ve spoke with my multifamily investor clients about changes expected relative to whether Biden or Trump wins the election. The answers somewhat surprised me. None of the opinions included specific policy differences between the candidates related to investment or real estate.
Instead, every person said that the main issue affecting their operations – COVID – will not change with the election. The prevailing opinion from the people I interviewed is that COVID impacts every segment of our economy. Thus far, multifamily has been less altered by COVID than other segments of commercial real estate but is beginning to show damage in renewals and occupancy. Absent additional stimulus approval, my clients expect the problems to worsen. If the results of the election alter the balance of power between the executive and legislative branches of our government, the speed with which stimulus can be approved and implemented may help lessen the financial impact on multifamily. The primary feedback, though, was that the only thing that will truly help COVID’s impact on multifamily is a widely available vaccine – not a political solution.
Another issue affecting inner-city multifamily is civil unrest, which some of my clients linked to the election. Those clients who support Biden said that if Trump wins the cities will burn, and if Biden wins demonstrations will be more peaceful. Those who support Trump said that if Biden wins, demonstrations in big cities will go out of control, and if Trump wins, law and order will be reestablished. Being a multifamily broker in Chicago, I have strong personal opinions about what will happen with civil unrest relative to which candidate wins, but I couldn’t find a consistent theme across the different perspectives from the clients I interviewed.
The concern I expected to hear from my clients related to capital gains changes if Biden is elected. Whether part of Biden’s platform or not, speculation is that capital gains taxes will increase under a new administration and that 1031 exchanges would be altered or eliminated altogether. When I asked my clients about this, no one seemed concerned that significant changes would be made to capital gains or 1031 provisions regardless of who is elected. This was perhaps the biggest surprise in the feedback I received.
My clients definitely had a concern about how politics affect our industry. Everyone had significant concerns about property taxes, rent control, affordable housing, eviction moratoriums, and much more. When they voiced these concerns, I kept steering them back to the question, “So what happens with these issues if Trump is elected and what happens if Biden is elected?” To the person, each client said no changes would occur with these issues regardless of who sits in the Oval Office. Local politics (city, county, state) is where decisions will be made that impact these issues.
In conclusion, my clients generally said the presidential election results would have a minimal direct impact on commercial real estate investment.