By ROSA SANCHEZ, ABC News
(NEW YORK) — Following the 2020 presidential election, there has been a noticeable uptick of real estate activity in New York City and other big cities.
According to data from Serhant, since November, the number of new deals in Manhattan increased 6% from the same period last year. This is one of the first promising signs of renewed confidence in the city, but there are other factors that brokers and agents are thinking about when considering the impact Joe Biden’s presidency will have on the U.S. real estate market.
After a difficult few months, those working in real estate are anxious to see how Biden will handle tax policy and federal funding. They also believe his administration will bring back a sense of confidence in the market, the U.S. and the future, that buyers and renters have been lacking due to the COVID-19 pandemic and the country’s political climate.
“Whether or not you supported the last administration, it was not a beacon of stability for just about anything,” said Warburg Realty agent Steven Gottlieb. “There was a revolving door of secretaries and appointees and nominees and nothing was stable. There was a tax bill that was floated halfway through the presidency that affected certain people differently than other people based on deductions.”
John Walkup, chief operating officer and co-founder of UrbanDigs, said buyers and sellers in cities like New York may see Biden’s victory as a transition to a White House that’s more likely to support urban recovery efforts. This also has to do with the hopes that a COVID-19 vaccine will likely be distributed, allowing people to move around cities more freely and safely.
“Such sentiments help spell the end of the ‘fear trade,’ and help buyers feel more secure and stable by putting a psychological floor under the market,” said Walkup, adding that the movement in the market may result in a “Biden bump.”
How Biden could help buyers and renters
Among other things, Biden is likely to remove the SALT cap — limitations on itemized deductions for home mortgage interest and state and local taxes — enacted under President Donald Trump.
Since property taxes tend to be higher in suburbs outside of big cities, a repeal of the SALT cap would benefit those who already chose to relocate from cities during the pandemic.
Garrett Derderian, director of market intelligence at Serhant, said, “The locales with the highest average SALT deduction, which would all see the greatest benefit, are — in order — New York, Connecticut, New Jersey, California, Washington, D.C., Massachusetts, Illinois, Maryland, Rhode Island and Vermont.” He added that outside of the costly coastal markets where sales have slowed this year and inventory has grown, due to the pandemic, the housing sector has performed so strongly that there is actually a shortage of available homes, especially at the entry level.
Biden’s proposal of a $15,000 tax credit for first-time home buyers would help those who have been unable to purchase homes due to rising prices, lack of inventory or personal financial problems.
Of course, this tax credit would be more helpful to those looking to buy homes outside of big, expensive cities.
Affordable housing under Biden
In his plan, Biden has said he will offer a $100 billion “Affordable Housing Fund” to expand low-income housing.
“These funds will be directed toward communities that are suffering from an affordability crisis and are willing to implement new zoning laws that encourage more affordable housing,” Biden’s plan states.
The only problem with this, Chris Okada, the founder and CEO of Okada & Company, said, is that affordable housing is “cost prohibitive in big cities” due to land prices, construction prices and property maintenance, so there would need to be a major cash injection sometime in the future.
Biden promises funding for cities
Another thing Biden will likely do for cities, which tend to vote Democratic, is provide them with funding.
“Because we’re deemed to be an ‘anarchy zone,’ as Trump called it … New York is in dire need of federal funding,” said Compass broker Michael J. Franco, referring to the Trump administration’s refusal to provide funding for New York, Portland and Seattle, cities which saw major anti-police protests since the death of unarmed black man George Floyd in May.
“When you have funding issues, the quality of life goes down — everything from mass transit to garbage — and it seems to have happened pretty rapidly,” Franco added. “I’m 100% confident that it will rebound, but in that regard, I think we’re in a better position to get federal funding from Biden than we were with Trump.”
Unlike Trump, who refused to give more stimulus money to New York and other areas hit hard by the pandemic, Biden is expected to push for a federal stimulus package worth as much as $3.5 trillion, The New York Times reported.
A big difference between Trump’s policies and Biden’s, brokers said, is that while Trump, a real estate mogul with myriad friends in high places in real estate, helped the wealthy with his $1.2 trillion tax plan in 2018, Biden has said he will tax the wealthy and help the middle and low classes.
The president-elect has said he will eliminate the 1031 exchange for real estate investors making over $400,000 in annual income and will use that income to finance child and elderly care.
Okada said that while this is good for the average buyer or renter, some real estate investors are in the top 1% to 5%, so they would not necessarily benefit from Biden’s tax plan.
“If Biden does implement those very high taxes for all the rich people, business will be bad, but if he is a little more moderate with his taxation and doesn’t do away with 1031 exchange and increases taxes only slightly, then I think cities will net effectively do better,” he said.
And when it comes to funding, he said, the future of real estate looks brighter under Biden.
“I think with Trump, cities would be starved of national and federal assistance because the cities are not making money right now, so they need a bailout from the federal government, and Trump specifically said he would not give any money to those Democratic cities. So compared to that, Biden is more flexible and willing to help,” Okada added.
A lot of this also depends on what Congress and Senate allow Biden to get away with, but overall, brokers are hopeful the Biden presidency will bring more stability to a market that was brought to its knees by the pandemic and, possibly, by the last administration.
“Markets, in general, do better when there is stability. When markets go down, it’s usually because of some big change that makes people want to get out,” Gottlieb, of Warburg Realty, said. “I think the Biden presidency will bring stability. Whether you voted for him or not, it’s going to be a much more predictable day-to-day life for the next four years. I don’t think the world is going to change on a daily basis based on a random tweet that gets posted at 3 a.m. by the president. Real estate, in general, hinges very much on consumer confidence, and when people are feeling stable and confident about their lives … they’re more willing to invest.”
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