November 13, 2024

After a campaign marked by bold promises and strategic proposals, Donald Trump’s victory in the 2024 presidential election signals potential shifts across the U.S. economy, with the real estate market expected to be a key area of focus. Trump’s campaign emphasized policies such as tax cuts, deregulation, infrastructure spending, and a reduction in environmental restrictions—policies that could influence everything from housing affordability to development timelines. However, each promise comes with its own set of risks and questions about viability. 

Here’s a look at how Trump’s 2024 campaign promises could impact real estate in 2025, and the potential pitfalls that may accompany them.

1. Lowering Interest Rates to Stimulate Growth

Trump’s campaign suggested a push for lower interest rates to make borrowing more affordable, with the goal of stimulating economic growth. As real estate is highly sensitive to interest rates, this policy could significantly impact mortgage affordability and buyer demand.

• Promise: Trump’s approach involves urging the Federal Reserve to lower interest rates, making it cheaper for individuals to obtain mortgages. This could drive up homebuying activity by reducing monthly mortgage costs, potentially making housing more accessible to first-time buyers.
• Risks: While lower interest rates may fuel short-term growth, they could also drive up home prices as demand increases. A surge in demand without adequate supply could lead to housing bubbles in high-demand markets. Additionally, Trump’s pressure on the Fed could create uncertainty, as the Federal Reserve may resist political pressure to keep rates low if inflation remains a concern.
• Viability: The Federal Reserve operates independently, and while a Trump administration could attempt to influence rate policy, there is no guarantee that the Fed will comply. If inflationary pressures continue, the Fed might prioritize stabilizing inflation over lowering rates.

2. Tax Cuts Favoring Real Estate Investors

Tax reform was a central piece of Trump’s campaign, with pledges to reduce taxes on capital gains and expand deductions for homeowners and real estate investors. These policies aim to make real estate investment more profitable and to incentivize homeownership.

• Promise: Trump’s campaign proposed lowering capital gains taxes and enhancing deductions, including mortgage interest deductions, which would benefit both property investors and homeowners. Lowering the tax burden on gains could encourage investors to buy, sell, or hold properties more freely, increasing market activity.
• Risks: Lowering capital gains taxes benefits high-income individuals and could lead to increased investor competition in the housing market, potentially driving up prices for middle-income homebuyers. Additionally, tax cuts can reduce federal revenue, leading to budget deficits unless offset by spending cuts, which could put pressure on other economic priorities.
• Viability: Passing significant tax cuts requires Congressional approval, which may be challenging if there is resistance to reducing capital gains taxes or expanding deductions. This promise may be more viable if Trump can secure Congressional support, but otherwise, its success may depend on bipartisan negotiation.

3. Deregulation and Speeding Up Housing Development

Trump’s 2024 campaign promised broad deregulation, particularly in zoning and environmental regulations, with the aim of encouraging faster and cheaper real estate development. By reducing bureaucratic hurdles, he hopes to address the housing supply shortage and lower development costs.

• Promise: Trump pledged to roll back regulations on land use and environmental protections, which would streamline the approval process for residential and commercial developments. Easing zoning restrictions could encourage high-density housing projects and increase housing supply, especially in urban areas.
• Risks: While deregulation may speed up development, it also raises environmental concerns, particularly in ecologically sensitive or flood-prone areas. Reduced oversight could lead to more development in risky areas, increasing the vulnerability of housing to natural disasters. This approach could also provoke local opposition, as many communities are protective of existing zoning laws.
• Viability: Deregulation initiatives can be implemented at the federal level but may face pushback from state and local governments. The feasibility of Trump’s deregulation agenda will depend on cooperation from states and localities, as zoning and building codes are often under their jurisdiction.

4. Expanding Infrastructure to Boost Regional Markets

Trump’s campaign also prioritized infrastructure investment, proposing extensive improvements to highways, bridges, and transit systems. Enhanced infrastructure could open up suburban and exurban areas for development, potentially shifting real estate demand.

• Promise: Trump’s proposed infrastructure plan aims to enhance connectivity and accessibility in suburban and rural areas, making these regions more attractive to buyers who might otherwise stick to urban areas. Improved infrastructure could spur suburban real estate development and boost property values in newly connected areas.
• Risks: Large-scale infrastructure spending can be difficult to fund without increasing national debt, especially if combined with tax cuts. In addition, construction delays and logistical challenges could postpone the benefits of these projects, potentially dampening investor enthusiasm. Additionally, environmental and zoning regulations still apply to infrastructure projects, which could complicate and slow down developments.
• Viability: Securing funding and Congressional approval is essential for any infrastructure project. While Trump has a strong track record of advocating for infrastructure improvements, he will likely face obstacles in implementing these plans, particularly if they require significant federal spending.

5. Restricting Immigration and Its Impact on Housing Demand

Trump’s stance on immigration was another major part of his 2024 campaign, with promises to tighten immigration policies. This approach could influence housing demand, particularly in rental markets in urban centers with high immigrant populations.

• Promise: Trump aims to implement more restrictive immigration policies, which he argues will reduce strain on social services and open up jobs to American workers. These policies could affect housing demand in regions with large immigrant populations, particularly in rental markets.
• Risks: Reducing immigration could lead to a decline in rental demand in certain urban areas, affecting landlords and property investors in cities with high immigrant populations. Furthermore, restrictive immigration policies might shrink the labor pool in construction, potentially slowing down new housing developments and exacerbating labor shortages in the industry.
• Viability: Immigration policy can be influenced by executive orders, making this promise more achievable than others. However, restrictive policies may face legal challenges and opposition from various sectors that rely on immigrant labor.

6. Relaxing Environmental Regulations on Real Estate

Another key promise from Trump’s campaign was to reduce environmental regulations, making it easier to build in areas that have traditionally faced restrictions due to ecological concerns. This approach is intended to free up more land for development and make real estate projects more affordable.

• Promise: Trump’s campaign emphasized reducing environmental restrictions that he argues are overly burdensome and costly for developers. He claims this would make more land available for housing, increasing supply in certain areas and addressing affordability issues.
• Risks: Reducing environmental protections could increase the risk of developing in areas prone to flooding, wildfires, or other natural disasters, which may lead to higher insurance premiums and potential property damage. Additionally, a more relaxed stance on environmental protections could spark public backlash and provoke legal challenges from environmental organizations.
• Viability: While some rollbacks on federal environmental regulations are possible through executive actions, many states enforce their own environmental laws that would limit the effectiveness of federal deregulation. Furthermore, legal challenges from environmental groups may stall these changes, reducing their impact.

What to Expect in 2025: Opportunities and Cautions for Real Estate Investors and Buyers

As Trump prepares to implement his campaign promises, the real estate market in 2025 could experience both opportunities and uncertainties. Here’s what buyers, investors, and real estate professionals should consider as they navigate this new landscape:

• Monitor Interest Rate Policy: Trump’s preference for lower interest rates may lead to more affordable mortgages, but buyers should prepare for potential fluctuations if the Federal Reserve resists political pressure. Staying informed on rate changes will be key.
• Assess Tax Strategy Changes: Proposed tax cuts, particularly on capital gains, could benefit investors, but the viability of these changes depends on Congressional approval. Investors should keep an eye on evolving tax policies to optimize their financial strategies.
• Evaluate Infrastructure and Regional Demand: Trump’s infrastructure plans could shift demand toward suburban and exurban areas, where improved connectivity makes these regions more accessible. Investors might find emerging opportunities in these markets, but potential delays in project completion could affect timelines.
• Consider Environmental and Zoning Risks: Trump’s deregulation promises could lower development costs, but reduced environmental oversight may increase risks in high-risk areas. Buyers and investors should consider the long-term viability of properties affected by environmental factors.

Trump’s second term promises a range of real estate policy shifts. By understanding both the potential benefits and the risks of his campaign pledges, those in the real estate market can make well-informed decisions to navigate the opportunities and challenges that lie ahead in 2025.

This blog post is for informational purposes only and is not intended as financial or real estate advice. Consult with a professional advisor before making any significant financial decisions.