Kamala Harris vs. Donald Trump: Who Would Benefit Real Estate Investors More?
November 03, 2024
Yes, Donald Trump is a real estate investor. But it’s worth breaking down the issues. The question is, who would benefit real estate investors more? It’s not as straightforward as you might think.
With the 2024 election approaching, real estate investors are closely monitoring each candidate’s platform to gauge potential market impacts. Kamala Harris and Donald Trump present contrasting approaches to economic and housing policies that could affect everything from tax strategies to property valuation.
Here’s a breakdown of eight key issues for real estate investors and how each candidate’s policies might shape the future of real estate investment.
1. Taxing Unrealized Gains
Kamala Harris: Harris has indicated support for taxing unrealized gains on high-value assets, including real estate. This policy would require investors to pay taxes annually on property value increases, even if they haven’t sold the property. While aimed at wealthier investors, this approach could discourage long-term holding strategies among real estate investors.
Donald Trump: Trump opposes taxing unrealized gains. Under his policies, real estate investors would only pay taxes upon selling or realizing a gain, allowing properties to appreciate without incurring additional annual tax burdens. This approach favors investors looking to build wealth through appreciation without added tax liability.
Advantage: Trump
2. Depreciation and Tax Savings
Kamala Harris: Harris’s platform includes a potential reevaluation of certain tax incentives that benefit high-income investors, such as depreciation deductions. If these deductions are reduced or capped, it could lower the tax-saving potential of rental properties, potentially affecting investment in both commercial and residential properties.
Donald Trump: Trump supports retaining bonus depreciation and accelerated depreciation, which allow investors to offset income and reduce taxable earnings through property depreciation. This policy is particularly beneficial for investors who leverage depreciation as a core tax strategy.
Advantage: Trump
3. Opportunity Zones
Kamala Harris: Harris has criticized the Opportunity Zone program for primarily benefiting wealthier developers at the expense of low-income communities. If elected, she is likely to pursue reforms such as stricter criteria for designating Opportunity Zones, enhanced reporting requirements for Qualified Opportunity Zone (QOZ) funds, and measures ensuring that resources directly benefit local residents through job creation. While these potential reforms could pose challenges for investors, they aim to direct more resources toward affordable housing and small businesses.
Donald Trump: Trump was a major proponent of Opportunity Zones, established under his administration. The policy provides tax incentives for investing in economically distressed areas and has been advantageous for real estate investors seeking tax benefits. Trump’s continued support for Opportunity Zones means greater flexibility and tax savings, especially for high-growth developments in designated areas.
Advantage: Trump
4. 1031 Exchange Continuity
Kamala Harris: Harris has not specifically addressed the 1031 exchange within her tax policies. However, she targets loopholes benefiting the wealthy, which could include proposals to eliminate 1031 exchanges for those earning over $400,000. If elected, she may pursue income caps for eligibility, restrictions on eligible properties, and limitations on deferred capital gains. However, a complete elimination of 1031 exchanges is unlikely.
Donald Trump: Trump is a strong supporter of 1031 exchanges, which would continue under his administration. This tax-deferral mechanism is particularly advantageous for investors looking to scale their holdings and increase property values without incurring immediate tax penalties.
Advantage: Trump
5. Affordable Housing Initiatives
Kamala Harris: Harris plans to tackle the affordable housing crisis by proposing the construction of 3 million new housing units over four years. This could create opportunities for investors through new tax incentives and utilizing federal land for development. Her proposal also offers $25,000 in down payment assistance for eligible first-time buyers, aiming to increase the housing supply. While she seeks to limit large investors from acquiring multiple single-family homes, her focus on incentives may still benefit savvy investors in the market.
Donald Trump: Trump’s policies prioritize deregulation, which could simplify the processes for developing housing without imposing specific affordable housing requirements. While this approach may lead to increased development, it might also result in fewer affordable housing units if profitability isn’t high enough.
Advantage: Tie
6. Mortgage Lending Policies and GSEs
Kamala Harris: Harris is likely to maintain government control over Fannie Mae and Freddie Mac, ensuring these entities remain focused on providing affordable mortgage rates. For investors, this could help maintain stability in mortgage access, especially for multifamily properties that include affordable housing components.
Donald Trump: Trump supports the privatization of government-sponsored entities (GSEs), which aims to reduce government intervention in mortgage lending. This shift could lead to increased private-sector control over mortgage rates, potentially raising financing costs for investors but also creating opportunities for innovation in lending practices.
Advantage: Harris
7. Climate Regulations and Property Development
Kamala Harris: Harris has a strong stance on climate initiatives, advocating for green building standards and energy-efficient requirements. While these regulations may benefit sustainable development, they could also increase compliance costs for real estate developers and impact overall return on investment.
Donald Trump: Trump favors fewer climate-based regulations, which could reduce the cost and time required for new developments. For real estate investors and developers, this approach may lower initial costs, particularly in regions with fewer environmental mandates.
Advantage: Trump
8. Interest Rates and Inflation Risks
Kamala Harris: Harris’s policies aim for fiscal stability and controlled inflation, which could help keep mortgage rates lower. Her focus on affordable housing and cautious economic planning may contribute to steady interest rates, benefiting those seeking affordable financing.
Donald Trump: Trump’s proposals, which include significant tax cuts and higher tariffs, have already driven up mortgage rates as investors anticipate inflation and increased government borrowing. Since late September, the average 30-year mortgage rate has risen from 6.09% to 6.54%, adding about $75 to monthly mortgage payments. Under Trump, these inflationary pressures could make financing costlier for real estate investors and homeowners alike.
Advantage: Harris
Conclusion: What’s Best for Real Estate Investors?
Overall, Trump’s policies generally benefits real estate investors more, providing tax advantages and support for growth-oriented initiatives, particularly regarding unrealized gains, depreciation, and Opportunity Zones.
However, Harris’s proposals could present unique opportunities, particularly through her affordable housing initiatives and commitment to maintaining favorable lending conditions. Investors may find their preferences align with different aspects of each candidate’s platform based on their investment strategy and goals. And of course, other priorities like social justice might “trump” pure economic self interests.
Ultimately, understanding these nuances will be essential for making informed decisions in the evolving real estate landscape as the election approaches.
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