What a Second Donald Trump Administration Could Mean for Real Estate

**This article discusses potential policies and market impacts under a second Trump administration based on past trends and campaign promises. Actual outcomes may vary, and readers should consult professionals for personalized advice.

The real estate industry is abuzz with speculation on how the administration might shape markets anew, now that Donald Trump is returning to the White House. President-elect Trump was deeply pro-business and had stamped his indelible mark on housing and development through deregulation and tax reform during his first term. Now, with promises of lower interest rates and bold initiatives to reduce housing costs, many in the industry are watching closely.

"Many in the real estate business are elated with a Trump victory, and if the administration can live up to its campaign promises, rightfully so," says Alex Beene, a financial literacy instructor for the University of Tennessee at Martin. 

With the housing affordability crisis at the forefront, policies aimed at reducing mortgage rates, cutting regulatory red tape, and opening federal land for development could profoundly impact homeownership and property investment. 

Pro-business policies and real estate

One of the most significant ways a second Donald Trump administration could impact the real estate market is through pro-business policies, particularly deregulation aimed at increasing housing affordability. Trump’s previous term saw efforts to roll back regulations, and his return promises an even more aggressive push to cut “unnecessary” housing development restrictions.

During his first campaign, Trump highlighted the significant costs tied to regulatory compliance, noting that such measures can add over $90,000 to the price of a new home. He and the Republican Party have proposed combating these inflated costs by streamlining regulations and opening up federal lands for large-scale housing projects. 

As Trump emphasized in his September speech to the Economic Club of New York, “Regulation costs 30% of a new home, and we will open up portions of federal land for large-scale housing construction. These zones will be ultra-low tax and ultra-low regulations — one of the great small business job creation programs.”

The broader strategy also includes a re-evaluation of federal government policies like the 2015 Affirmatively Furthering Fair Housing (AFFH) rule. Originally introduced during the Obama administration, AFFH required cities receiving federal funding to identify and address barriers to fair housing, such as discriminatory practices against protected classes. Trump reversed this rule during his first term, asserting that it placed undue burdens on suburban communities. 

According to Ben Carson, Trump’s former Secretary of Housing and Urban Development (HUD), Project 2025—a conservative housing policy framework published in 2023—calls for a further weakening of the Fair Housing Act and eliminating Biden-era reinstatements of AFFH.

Economic implications: Interest rates and lending

A central pillar of Donald Trump’s campaign rhetoric for a potential second term is his promise to push for lower interest rates, specifically targeting a return to mortgage rates of 3% or below. While the president does not have direct control over mortgage rates, Trump has repeatedly claimed he would influence the Federal Reserve to achieve this goal, citing the potential for significant savings for homebuyers. 

During a speech in New York, he stated, “Reducing mortgage rates is a big factor. We’re going to get them back down to, we think, 3%, maybe even lower than that, saving the average homebuyer thousands of dollars per year.”

At the time of writing this article, mortgage rates are 6.72% - a far cry from the historical low rates at the beginning of this decade. Trump's wish for rate reduction could give lenders a reason to have low rates: lower monthly repayments will clearly make ownership relatively more accessible. 

However, experts caution that the president cannot arbitrarily dictate Federal Reserve policies. “The president doesn’t set mortgage rates. If elected, Trump probably wouldn’t be able to arbitrarily decide to lower them even if he wanted to,” says LendingTree chief economist Jacob Channel, reflecting skepticism about the feasibility of such promises. 

Lower interest rates could also create favorable lending conditions for real estate developers and investors. These policies could stimulate new construction projects, revitalizing commercial real estate markets and increasing inventory across various housing sectors.

Jeff Holzmann, Chief Operating Officer of Texas-based commercial real estate firm RREAF Holdings, remarked, “The fact that Trump is a real estate developer himself also lends to the feeling that he 'understands' the market and what drives demand, quality, and profits.”

Tax policies and real estate incentives

The proposed 2025 Donald Trump tax agenda is highly concentrated on stimulating activities of the economic cycle, mostly in real estate. Trump intends to cut the corporate tax rate from 21% to 15% for those companies producing in America.

According to Mark Hamrick, Washington Bureau Chief and Senior Economic Analyst for Bankrate, “A lower corporate tax rate could stimulate housing activity, boost real estate investments, and potentially lead to increased housing market activity. Among the potential ripple effects could be a rise in construction, more supply, and lower home prices.”

The following are key components of Mr. Trump's tax proposals and their effects on real estate: 

• Making the 2017 tax cuts permanent: Trump would seek to lock in the Tax Cuts and Jobs Act (TCJA) for individual taxpayers that would benefit middle-income earners.
• Extend 100% bonus depreciation: This will incentivize real estate development and improvements, allowing investors to write off property costs in the year of purchase.
• Easing regulations related to property development and land use: Potentially shortening project timelines and lowering costs.
• Expansion and improvement to opportunity zones: Trump sought an expansion in Opportunity Zones designed by the TCJA to create a conducive area for development.
• Keep 1031 like-kind exchanges: Trump promised to retain the popular program 1031 exchange that permits the deferral of taxes while reinvesting.
• Deduction for qualified business income: Extend the QBI deduction established under the TCJA to continue tax relief for investors.

Labor market, construction costs, and tariffs

The implications for the construction workforce and the housing market are deeply intertwined with the immigration and economic policies that Trump has proposed, especially on mass deportations. "The largest mass deportation operation in American history" is how he has described his plan time and again on the campaign trail. If implemented, it could cause quite a number of disruptions to the construction industry, where undocumented immigrants already make up a big percentage of the workforce.

The National Immigration Forum estimates that there are 1 to 2 million undocumented workers in the U.S. construction sector, accounting for an astonishing 10% to 19% of the total workforce. If that portion of the workforce is removed, it could mean labor shortages, higher wages, and increased housing costs for construction projects and therefore less affordable housing.

Beyond labor concerns, Trump's proposed tariffs on imported goods, particularly building materials, could greatly affect the affordability and development of housing. Trump has talked about slapping a 10-20% tariff on all imports, but as high as 60-100% on goods originating from China. Tariffs on key building materials such as lumber, steel, and concrete could greatly increase construction costs.

Higher tariffs would increase the burden not only on developers but also on homebuyers, since increased costs would definitely be passed down to consumers.

International and commercial real estate implications

Trump's election as president sent shockwaves earlier this year throughout the European real estate market, where many professionals were very apprehensive about what his presidency might mean for the industry. A possible Trump presidency ranked as the third-biggest threat to European real estate markets in a survey conducted earlier this year by GRI Club, an event organizer for real estate lenders and investors.

European policymakers have threatened retaliation if Trump makes good on his threat to slap tariffs on goods coming into the U.S. Actions like this have the potential to make the already precarious European economy even weaker. Economists also say the fragile state of Europe's economy, as forecasted, is very susceptible to any negative impacts a multi-front trade war with both the U.S. and China may create. Increased tariffs on imported construction materials would directly hurt the profitability of real estate ventures in Europe. 

Despite these concerns, there remains a degree of skepticism among international real estate executives regarding the policies Trump might actually implement if re-elected. While his campaign proposals often raise alarm, there is uncertainty about whether his rhetoric will translate into concrete policies upon taking office. 

Conclusion and Outlook

A second Trump administration presents a mixed bag of potential benefits and risks for the real estate sector. On the one hand, his proposed tax incentives, deregulation efforts, and support for the real estate industry could spur significant short-term growth. For homebuyers, the prospect of lower mortgage rates, though uncertain in its feasibility, could stimulate demand, easing affordability challenges for some buyers. 

Furthermore, Trump’s pro-business rhetoric and actions are viewed favorably by real estate tycoons, with figures like Isaac Toledano, President and Founder of BH Group, highlighting that “the fact that Donald Trump is our next president and people understand that he is pro-business... sends a clear message that Donald Trump is pro-real estate.”

However, the real estate sector faces significant long-term challenges that even Trump's policies may struggle to overcome. Most economists agree that a severe housing shortage is at the heart of the nation's housing affordability crisis. 

As Patrick McLaughlin, senior economist at the Mercatus Center, explains, “Housing supply, or lack thereof, has plagued the U.S. housing market for at least a decade, with our estimate of a range of 2.5 million to 7.2 million unit gap from 2012 to 2023." 

In conclusion, the balance between short-term gains and long-term hurdles will define the future of the sector. Time will tell how these proposed changes play out, but the future of real estate under his leadership is one of both opportunity and ongoing complexity. 

Sources:

https://www.newsweek.com/what-donald-trump-win-means-housing-market-1981747 

https://www.econclubny.org/recent-speakers/-/blogs/donald-j-trump 

https://civilrights.org/wp-content/uploads/2024/08/Project-2025-Fair-Housing-Lending.pdf 

https://www.realtor.com/news/trends/donald-trump-president-housing-market/ 

https://chicagoagentmagazine.com/2024/11/06/donald-trump-win-housing-policies/ 

https://www.troutcpa.com/blog/what-a-second-trump-term-could-mean-for-real-estate-and-taxes 

https://immigrationforum.org/article/immigrant-construction-workers-in-the-united-states/ 

https://materials.griclub.org/europe/realestate/reports/chairmens-retreat-2024