Biden Wins — What Does This Mean For Real Estate In New York?

Never has there been an election like the one America still finds itself unraveling, even a week after our votes were cast.

The polarizing differences between President Donald Trump and President-Elect Joe Biden are so dramatic that they have driven a wedge between the American people. While we all may hold different beliefs, we all shared the sensation of holding our breaths and waiting for these final counts to be over.

In Trump’s hometown of New York City, many of the people flooding the streets were rejoicing after hearing that the current president did not win reelection. The support for Joe Biden was overwhelming, with almost every part of the city voting in his favor.

In this election season, real estate was one of the hot topics being discussed. Many investors have been holding off on major decisions until after the election. Whether your candidate won or not, you may still be wondering if it is a good time for real estate and how the President-Elect will impact the market.

What does Biden’s win mean for affordable housing and low-income renters?

In February, Biden released an outline of his $640M housing plan. In contrast to Trump’s agenda, Biden hopes to bring relief to the low- and middle-income classes instead of tax breaks for investors and the wealthiest 1%.

Biden’s proposed plan mostly focuses on helping the lower and middle class afford to become homeowners. It calls for significant government funding to support the housing crisis. On the other hand, Trump’s plan included privatizing the federally-run mortgage companies, Fannie Mae and Freddie Mac.

Here are a few critical points of Biden’s real estate plan.

• Giving first-time homebuyers a tax break of $15,000 that would be available at the time of purchase.
• Encouraging diversity in areas that are currently either all high-income or all low-income by creating an incentive for teachers, first responders, police, and national workers who are eligible to move to these areas.
• Creating an organization that helps raise your credit score based on tracking rental payments and utility payments being paid on time.
• Help to push Section 8 to full funding. Currently, there is a quarter of eligible participants in this program that do not receive its benefits.
• Tax breaks for people who pay over 30% of their income towards housing and utilities. 

Overall, most experts anticipate that this will help lower-income families become homeowners while also diversifying suburban areas. However, there is no guarantee that Biden will follow all his campaign promises. In the current climate of a Republican Senate, Biden may see more trouble passing his plan than anticipated. 

How will this impact companies in New York?

Another area where these two candidates differ in is their stance on the 1031 tax code provision. A 1031 exchange is from Section 1031 from the IRS, which allows you to reinvest the capital gains taxes from selling an investment into a new one. Biden’s plan calls for the restriction of 1031 tax exchanges to those making less than $400,000 per year. This will affect anyone who currently takes advantage of the 1031 tax exchange and makes more than $400,000 a year. 

For many people who make their income on rent payments, the money has stopped. The Trump administration made an important call to stop eviction processes during the pandemic. This was much-needed relief for many individuals struggling to keep up with payments and in danger of losing their homes. 

Unfortunately, the plan didn’t cover how these debts would be replayed or what investors should do during this period to handle the lack of incoming payments. The responsibility will now fall on the incoming president’s shoulders to address how these people will be helped.

The differences between who wins the presidency does not mean much specifically for New York City. However, there is one case. Even though New York City is Trump’s hometown, he has not supported the proposed funds needed for the MTA and the Housing Authority, two of the significant drivers of New York City. Biden’s plan does address these changes, though it still lowballs the funds being asked for.

Overall, many companies and investors will see some change, but that is normal in an ever-changing market, especially amid a pandemic. What you can expect from Biden’s plan mostly revolves around more stringent taxes for the higher income brackets to cover the costs for his other housing and domestic plans. 

How will homebuyers be affected?

There has never been a better time for the 30 year fixed rate mortgage— America’s pride and joy. No other country has anything comparable to that long of a fixed rate. 

• It was part of Trump’s plan to privatize Fannie Mae and Freddie Mac. With Biden at the helm, it’s growing more and more unlikely that this bill will come to fruition.
• Many people troubled by the turbulent times have switched to invest in safer bonds and mortgage-backed investments, driving the low rate we see now.
• There are many buyers on the market looking for better housing, and Biden plans to throw incentives towards investors that are willing to build.
• Many of the planned incentives are for building greener and more desirable housing options. 
• With all of these planned incentives and tax breaks, it might be more feasible for many in the middle class who could not afford to be homeowners before to now safely buy. 

If Biden can pass all the sections of his plan in a Republican senate, it looks suitable for first-time homebuyers and investors alike. With the number of rental assistance programs and incentives for paying rent on time, the plan is to buy a home a worthwhile endeavor for both investors and first-time buyers.

How will Biden’s win affect luxury property owners and investors?

It’s no secret that Biden’s platform is primarily focused on bolstering the middle-class, which means putting higher taxes on the wealthy. This can paint a bleak picture of the future for the highest echelon of investors and property owners.

Financial advisers have already reported seeing an increase in tax and estate appraisals from upper-class clients. These individuals are concerned about the current $11.58M that estate owners can leave to their heirs exempt from taxes. It’s presumed that this number will be walked back to $5.49M.

Another eye-raising change that will impact high-end real estate investors is the aforementioned changes to 1031 exchanges. These are popular exchanges that real estate investors at all income levels use. However, Biden’s tweaks to the 1031 provision would mean those high-end investors that make more than the $400,000 annual mark would no longer be able to capitalize.

This may mean that we see an increase in activity from high-end investors and more luxury properties changing hands in the city as owners and investors above this $400,000 mark try to take advantage of the 1031 exchanges while they still can.

Is there a silver lining for investors and property owners in the highest income brackets? President Trump and Governor Cuomo have rarely, if ever, seen eye-to-eye, which has been difficult for the city. On the other hand, Biden and Cuomo are close friends, and having an ally in the White House is an advantage that NYC hasn’t had in a while. This relationship could pay off in other ways for all New Yorkers.

Conclusions

In these strange times, it is easy to get caught up in fear and sensationalism. If you have investments in New York, there is no need to panic. There may be some changes coming our way with a new president in the mix. However, it’s essential to keep in mind that Biden will have to get his plans and proposed changes through a Republican-controlled senate. He may have a more challenging time passing his plans than expected, despite his promises of working across the aisle.