The Landlord Lens - How a 2024 Harris Presidency Could Shape the Housing Market

Episode Date: October 29, 2024

Learn how a potential 2024 Harris presidency could impact the U.S. housing market. From interest rates to inflation, discover the factors that might shape real estate prices, mortgage rates, and the overall market.  #election2024 #electionnews #kamalaharris #donaldtrump Disclaimer: TurboTenant is not endorsing a candidate. We created this and our accompanying Trump video purely for educational purposes, and to explore how our 2024 presidential candidates may impact landlords and real estate investors.Sources:1. https://www.americamortgages.com/harr...2. https://www.businessinsider.com/fed-r...3. https://calmatters.org/housing/2022/1...4. https://www.cbsnews.com/news/trump-ha...5. https://www.congress.gov/bill/118th-c...6. https://www.congress.gov/bill/118th-c...7. https://www.docketwise.com/blog/kamal...8. https://finance.yahoo.com/personal-fi...9. https://www.freddiemac.com/research/i...10 .https://www.gao.gov/products/gao-24-1...11. https://www.housingwire.com/articles/...12. https://www.independent.com/2024/09/3...13. https://lailluminator.com/2024/10/01/...14. https://mailchi.mp/press.kamalaharris...15. https://www.moodys.com/web/en/us/site...16.

I'm Jonathan. This is Krista. And we're here to help you be a better landlord. All right. So on this episode, we're going to do things a little bit different. We are talking about our presidential hopefuls. And in this one, we're talking about a potential Harris presidency. That we are. We know that this is a contentious topic. I don't know if you're aware, but politics can often bring out the worst in people.

So we want to make sure that you understand from the jump, TurboTenna is not taking a political stance. what we are going to do in this video and our accompanying Trump video is really get down to how the proposed policies could impact real estate investors and your renters. So we are going at this as factually as possible. We have so many sources for you to check out in the description down below. And we are going to go ahead and jump off with a Harris presidency. Okay. So we're going to take this sort of one key subject at a time, starting with interest rates. What has Harris said she will do if she does win the presidency about interest rates? It's a great question, largely because the president doesn't actually have direct influence on the Federal Reserve.

The Federal Reserve is the organization that has control over interest rates. They are the ones who decided to cut it 50 basis points in September. But that is not something that the president has an impact on because the Fed is very strictly independent. They pride themselves on their independency, so it is not something that Harris could come in and necessarily impact. However, there is a study from Moody's which assess the macroeconomic consequences of each candidate's presidency, and they noted that under a Harris presidency with a divided Congress, they would expect the inflation rate to actually steadily moderate getting down to around 2% by summer of 2025. Will that happen? We'll have to wait and see because, again, the executive branch cannot impact inflation rates

in the way that you might expect. Yeah, and I think that's a really important point. That's a huge misconception. I think that a lot of people have thinking that the president is the one who tells the Fed what the rate should be. Not the case. The president really doesn't have much control there. Absolutely. So it's pretty much a wait and see, but the forecast looks good under Harris presidency.

Okay. What about taxes? What has Harris said about taxes? Quite a bit. So as a brief overview, we're really looking at tax implications and perhaps greater taxes on folks with significant money. So lots and lots of wealth. What does that mean here?

So we'll dive in policy by policy, but a lot of these are impacting individuals whose net worth is over $100 million. Okay. Which is, I think, under a percentage of Americans. Well, it's you and me, obviously. Well, clearly. I mean, look at us.

Correct. Correct. So taking it from her actual plan, first and foremost, she wants to secure tax relief for more than $100 million. Americans by expanding the child tax credit. Additionally, she wants to cut taxes by up to $1,500 for frontline workers via an expanded earned income tax. And she has noted that she wants to reduce costs associated with health insurance from the Affordable Care Act by an average of $6,600 annually.

Those are top three plans. That could be really great for renters, particularly. Also, investors, too, could see some positive implications from this kind of tax relief. And if people have more money to spend, it's likely they are to spend it on housing and perhaps become less rent burden on a renter point of view. But something that has been more contentious than these planned cuts and credits are proposals that could impact and will impact the top tax rate on long-term capital gains, specifically for people with high net worths. So she is looking to increase the top tax rate to 28% for taxable income above $1 million and increase the net investment income tax N-I-I-T, if you're savvy, to reach 5% on income above $400,000.

As reported by the Tax Foundation, the world's leading nonpartisan tax policy organization. So, that was a lot of numbers. It's a lot. Okay, so to unpack that, if you make less than $400,000, Harris has not said she's going to raise taxes necessarily? Specifically, she has promised not to raise taxes on anyone earning less than $400,000. So we'll see how that plans out, but most of her tax plans are really going after the very wealthy and corporations. So you'll see that echoed throughout all of these pieces. For example,

she's also endorsed Biden's fiscal plan for 2025 with the billionaire minimum tax on unrealized capital gains. So this, again, would apply to taxpayers whose net worth is over $100 million, which is actually just 0.01% as of 2019, which is the latest IRS data. So most of you, likely, are not going to be impacted by that. If you are and you'd like to get rid of some of that money, I am available. Yeah, ship it over here. We can take it right to us. We can actually take it right here.

We'll give you the address. But specifically, the other part of that is that this is likely to only apply to tradable assets, meaning real estate would not be impacted. Unrealized gains, if you were not savvy, which I was not until I started researching this, are when you have an asset whose value has increased since you purchased it, but it's not been sold yet. So it's really just a paper value that's increased. So again, it may not.

be something that impacts anyone watching this video, I wouldn't expect it to impact the vast majority of Americans. However, collecting more of that revenue and being able to support more social programs would have a positive impact on most Americans. Yeah, absolutely. And this is an important one, this unrealized capital gains tax. This is something I saw Pace Morby talking about, being very alarmed about when Harris said that this was going to be a part of her, you know, presidential policy. And like you said, it really only applies to individuals with over $100 million in net worth. It doesn't actually apply to real estate because it is only for tradable assets. Yeah, very good note. Thank you for laying that out.

Okay. So to wrap up this section on taxes, could Harris do these policies as she's laid out? Possibly. I think the biggest struggle is going to be getting it through the divided Congress, but there seems to be support for it. Okay. And how would these things have an effect? on the housing market. So if we do see an increase in tax collections from the ultra-wealthy corporations, we would likely also see increased government spend on social programs and infrastructure to things that are pretty desperately needed. And better-funded social programs could lead to economic growth by creating new jobs and improving consumer confidence, which means people would have more money to spend on housing, utilities, and other cost

of living expenses. Okay. That all makes sense. All right. Shall we move on? to housing prices and supply. Absolutely. Let's jump in. This one is a beefy topic. She actually has outlined several points that we're going to move through here, really a multi-prong strategy in her August 2024 newsletter. So there is plenty. First, let's kind of set the scene.

According to the latest figures from Freddie Mac, the U.S. has a shortage of around 3.8 million homes for sale and rent. So in an effort to make rentals and home ownership more affordable, Harris has promised to construct 3 million new housing units in the next four years if elected. She also plans to enact the first ever tax incentive for building starter homes and wants to expand existing tax incentives for building affordable housing via businesses. That is lofty. It is lofty. And so she specifically called out the low-income housing tax credit.

And that provides funding to support construction or rehabilitation of affordable housing. Once the housing is rented, investors can begin to claim the tax credit as long as the property falls. the rules of the program according to the Department of Housing and Urban Development. So that's already in place, but she wants to expand it. She also is taking aim at actually supplying these funds. So she has said that she wants to double Biden's proposed funding to a whopping $40 billion. So that is quite lofty in and of itself, could be done. And that would help increase the housing stock if she can properly fund these programs and incentives.

Yeah. The odds aren't exactly in her favor. But if she could do it, that'd be great. We've seen this kind of play out. California governor Gavin Newsom made similar promises in his 2018 election cycle. Yeah. Say that he wanted to have, I believe, 3 million, yeah, 3.5 million housing units built in four years. But he's fallen short.

So they've only completed about a fifth of the work needed to meet that goal. However, as the independent reports, Harris would have to probably immediately boost construction efforts by like 50% to meet her goal in four years. Yeah. So is it doable? Lebe. It's going to be really tough. She also has a couple of plans to help push things along. So go with me on this because there's quite a bit to unpack. First and foremost, she wants to pass the Stop Predatory Investing Act, which would update the U.S. Tax Code to ban private equity firms from mass buying homes, specifically single-family homes, by denying interest and depreciation deductions for taxpayers owning 50 or more single-family properties. Yeah, that one's huge. Let's pause there for a second. I know that our audience is very interested in that one. This is honestly very similar in concept, I think, to that taxing unrealized gains, where on the surface it looks like it hurts real estate investors,

but it is aimed at the really, really large investors, right? This is specifically taxpayers owning more than 50, 50 or more single family homes. Yes, and private equity firms specifically too. So it's aimed at the top institutional investors, and smaller investors might actually see great opportunities if this moves through. Because while institutional investors don't comprise much of the housing market share, in fact, I think I have a stat here for you. According to the government accountability offices May 2024 report,

institutional investors own about 2% of single family homes nationwide. However, some markets are more saturated. So especially in the southeast in like, let's say Atlanta, institutional investors own 25% of their single- family rentals. So what you might see in that market if you're an independent landlord is once this tax incentive is no longer there for these institutional investors, they may be less willing to snap up available properties, which means a better opportunity for you to get it at a more affordable price, or at least be able to move in there with your resources versus all of the capital behind their buying power, which is significant. It's a good point. A few months ago,

we made a student housing course, which you can find at TurboTenet Academy. And in there, we talked a lot about how much Black Rock in particular has been investing in student housing over these last few years. It's a staggering amount of money. I don't remember the exact figure, but it was a whole bunch of money. Billions, if I remember Chris. Yeah. And if you are

interested in getting into student housing, you are unfortunately going to be up against people like Black Rock. So I think that this is really aimed at those sorts of firms and stopping them from snatching up all available housing. Exactly. It really is. So that's one

prong of her approach. She also plans to pass the preventing the algorithmic facilitation of Rental Housing Cartels Act of 2024. Very rolls off the tongue. And this would bar the use of algorithmic systems in artificially inflating rent prices and reducing the supply of leased or rented residential properties. That could also sound scary to people. I know that everyday investors use tools like TurboTenance calculator to determine how much they should be charging for rent. And this bill does not attack that process. In fact, it is really going after companies like RealPage and a couple other folks who are named in a big suit that's ongoing, where the government found that they were inherently creating a monopoly where property managers of giant multifamily complexes would be setting rents against with each other to try and drive up prices overall. And it's really impacting the housing market. So both of these bills are actually, they've been proposed before. In fact, I think both were proposed. this year. I know one was back in January. So it will be interesting to see how it actually shakes out. But I have to say again, overall, ordinary landlords, mom and pop, independent landlords,

you are not likely to see native impacts from these specific bills. Okay. Because largely, and particularly with the preventing the algorithmic facilitation of renting household cartels Act of 2024, they specifically say in the bill summary on one of the senators' websites who endorsed the bill, that this is going after large corporations. So again, that is really who is in the sites of Harris's campaign. It's not the smaller investors. It is institutions who are snapping up properties and then artificially inflating rent. So please just keep that in mind as you move through.

Don't get swayed by misinformation. But also do your research. You know, these are still in development, as are all of the proposed things that we're going to be talking about today. So going off of the details that we have, the independent investor should see positive impacts from this. Okay. And now let's cover, I think, one of the bigger things that Harris has put forward, which is down payment assistance for first generation homeowners. Yeah. What has she said? It's a dozy. Okay. And we'll move through it. Again, details are a little sparse. Experts say it's more detail than we usually get from these kinds of plans, which is kind of encouraging. He'll take it one piece at a time. So inherently, Harris has proposed providing working families

who have paid rent for the last two years on time and are looking to buy their first home with up to $25,000 in down payment assistance and more generous support would come for first-generation home buyers. So if there is a family where no one in the family has purchased a home, they can qualify for more assistance that hasn't been quite defined how that would shake out monetarily yet versus up to $25,000 for folks just looking to purchase their first home. This is a lofty goal. It is. And I guess let me point out the elephant in the room, which is the, if suddenly first time home buyers are given $25,000 in down payment assistance, how is that not going to lead to home prices going up? $25,000 across the board. A very good and common question. So I listened to

an interview from Jerusalem Demsus. She is the staff writer at the Atlantic and author of on the housing crisis, land, development, and democracy. She actually reached out to the Harris campaign to ask some questions about this program and learned that the down payment assistance portion would only be enacted once there's progress and significant progress on home building endeavors. Those three million homes. Exactly that. The reason for this is because if you provide increased monetary funds before you have an increased supply, you're just going to have a bidding more. And that obviously doesn't really help anyone out. So looking for significant progress on that supply portion first. Now, we don't have a figure on what that means. We don't have like

a concrete benchmark as of yet. DempSys even noted that it's probably going to be easier for the Democratic Party to secure a down payment assistance policy versus the number of policies that would have to be enacted to get the three million homes built. So this is. This is a is a sticky situation. But if it plays out correctly where we have the supply increase first, then people are going to have more options and that $25,000 can move a lot further, particularly in markets where home prices are still low. If you are in a hotter market, I hope you have some money in savings because $25,000, like in Colorado, for example, where we are filming, it doesn't move that far. It's a real humbling process here. I know off camera we have also

chatted about when this assistance would come in. Yeah. It's really designed to not be a tax credit at all. It's not going to be like that. It will have to be available upon closing. Right. However, no one is quite sure how that will play out. So I have a quote here from Bill Kilmer. He's the senior vice president for legislative and political affairs at the Mortgage Bankers Association. And he noted that there is quite a bit of confusion about how that would actually be metered out, especially because unfortunately there are just so many hoops to jump through to make something like this work. He did say that part of this confusion probably stems from the speed at which the Harris campaign had to put together this policy after Biden had stepped down from the reelection. And he notes that, you know, this is a historic novelty in which the nation has not seen an eligible sitting president forego re-election since Lyndon Johnson in 1968.

A bit a hot minute. There are fewer upfront details. However, looking through some of the policy proposals that were already in the works and things that Harris has said in this multi-product approach, we have enough details to say this is possible. And they're going to have to work really fast to figure out how to connect the dots and actually make it happen. Wow. Yeah, this one is really interesting.

In fact, it probably deserves its own episode. I mean, we'll see as more information about this as release. Maybe we will make a full episode about this because obviously you could really, really, really impact the housing markets across the country. So the plan, though, is increase supply first. And once, slash if that is achieved, then provide the down payment assistance. Yes. And as you said, that would not be a tax credit or a rebate or anything. It would be literally here's 25. Direct monetary funds. Yeah. Yeah. Okay. Which is quite intense. We'll have to see if, you know, the big part that supply portion can actually move through,

then there's a lot more to figure out. Wow. Okay, so to wrap this section up, you know, could she actually do all these things? Likely, yes, if she is able to figure out how to speed along construction efforts by 50% as soon as she steps into office. It's a big if. Yeah. Yeah. And the effect would be huge.

The effect could be huge. So this could impact approximately 4 million first-time homebuyers and giving them greater access to purchasing property. Naturally, on the investor side, you might see lower rents because if there is more housing available, your rental is going to have to be more competitive and priced competitively to attract renters. Until we see that movement, it's going to be hard to determine how much of an impact and how rents are going to have to fluctuate, if at all. But particularly in markets where housing is more affordable, you might see an even more drastic impact on your average landlord.

Okay. All right. Let's move on to inflation. What has Harris said about inflation? You know, not as much as you might think. She hasn't offered a direct response to addressing inflation. However, she has made plans to lower some important cost of living bits and bobs, specifically grocery costs. So in their first 100 days in office, Vice President Harris and Governor Walls, they aimed to advance the first ever federal ban on price gouging food and groceries.

This would also help with setting rules about big corporations and how they are not allowed to unfairly exploit consumers, while securing new authority for the FTC and state attorneys general to investigate and oppose new penalties on companies that flout those rules. So largely in her documentation, this stems from the price gouging that happened during COVID, where grocery chains were making ridiculous profits and everyday Americans were tussling over toilet paper. So aiming to not let that happen again. Specifically, Harris says that she will direct her administration to crack down on unfair mergers and acquisitions of big food corporations that undermine competition. Trying to eliminate monopolies wherever possible, that's also a big theme of her platform. So we'll see if these prices are lowered, if this price douging over groceries is mediated in some way, we could see positive gains for landlords and tenants alike.

Tendents would have more flexibility. Maybe that would help them become less rent burdened if food costs are going. down. They could also perhaps qualify for more if they have more of that income freed up, which in turn helps the landlord collect rent and maintain their own mortgage payments. Absolutely. Yeah. Lower living expenses would be good all around. Yeah. We would all like that. We would like that. So with these proposals, could she actually do it? This is where it gets a little bit tricky, likely not to the extent that she specified in her newsletter back in August. So I have a quote from Brian Nelson. He is a top Harris economic advisor. He told reporters at

the Democratic National Convention, that Harris's grocery plan has inherently kind of scaled back to just simply match up with some federal standards of so-called like price gouging guardrails that have already been in place in 37 states. So not quite the full big swing that she had outlined in that original plan, but still looking to do something on a federal level versus just kind of piecemeal across the stage, which we have now. And say she is able to do it, what would the effect be? So people are split. Some experts say there would be no impact at all. They are just thinking it wouldn't be effective. And then Politico reports that Harris's approach could actually deter this opportunistic gouging. So unfortunately, as

emergencies become more frequent, both due to climate change and geopolitical unrest, that could be positive in the long run if she's able to implement these policies. It's going to be hard to say. Interesting. All right. So obviously there are a lot of other topics we could cover. We are just trying to stick to the big ones in which we have information put forward already that could affect the housing market across America. And so with that, I guess we'll wrap it up. Beautiful. I would say, you know, Harris has set her sights on some pretty big players. She's made some impressive sounding plans that could help the average American average investors. However, it's part of the political strategy to make big promises and then subsequently

see how they shake out or don't. I would expect that if she is able to make good on some of these promises, specifically increasing the housing supply and providing first-time homebuyers with down payment assistance, the housing market will inevitably be impacted greatly. We would see, of course, lower rents most likely, but also better affordability for renters. So it's going to be a wash to some extent for investors, depending on how this all plays out. Again, if you are in that top income bracket, you're making over $100 million per year, you are likely to see more of these impacts than your average landlord. Same with big corporations and institutional investors.

But really, regardless of who ends up in the White House, issues with the housing market take a really long time to fix. So I have a quote here, again, from Jerusalem Dempsis, who said, housing and housing supply and supply side issues take years to correct. We've built ourselves into this crisis over decades. It's going to take us a while to get out. So I'm curious, audience, what do you think will happen under a Harris presidency? Leave a comment down below and share your thoughts. And be sure to catch our video on the impact of a Trump presidency. The link is in the description.

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