Friday, December 18, 2020 / by Vanessa Saunders
By Vanessa Saunders, MBA, MIMC , Broker Owner, Global Property Systems Real Estate.
National housing policy will hold a much higher priority in the Biden White House than it was with the previous tenant. Jim Parrott, a nonresident fellow at the Urban Institute, said housing is 'not an abstraction' for the president-elect. Parrott was keynote speaker at the National Association of Realtors' Real Estate Forecast Summit on December 10th, 2020. Parrott served as a senior adviser to the National Economic Council during the Obama administration where he led the team counseling the cabinet and the president on housing issues. Before that, he was counsel to U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan.
Affordable housing a priority.
Parrott said that he felt the Biden team will see more affordable housing, for both buyers and renters as a goal worth taking on in and of itself, as a part of broader economic challenges. Biden views the lack of affordable housing in metro areas near good jobs as a constraint on growth and GDP. To do that, Biden will need to fold housing policy efforts into a larger economic pushes on stimulus early next year, and infrastructure following closely behind. Said Parrott, “My guess is you’ll see housing policy elevated to a level of priority on the economic side in a way that we haven’t seen in a long time.”
One area the new administration has to deal with is the number of FHA-financed homes currently in forbearance and facing foreclosure or short sale. 35 million homes in America are in forbearance. That’s one in ten FHA borrowers not paying down their mortgage. That is a huge number compared to mortgages backed by the GSE’s (government-sponsored enterprises Fannie Mae and Freddie Mac) which are in forbearance at a little less than half that rate.
Biden’s team will want to extend the timeline to align with the recovery so that borrowers have to start paying again when the economy is healthy. Still, because most people have some equity in their homes, Parrott expects they will sell those homes before they go into foreclosure. More homes on the market may signal the end of the seller's market and prices will adjust lower.
Abolishing 1031 Like-Kind exchanges.
Investors currently taking advantage of 1031 Like-Kind exchanges may see that deduction disappear under a Biden administration. The program, intended to help small investors and struggling landlords is regularly used by commercial investors to defer capital-gains taxes when they sell properties by directing the proceeds into new investments, a practice many large investors take advantage of on a continual basis. Getting rid of this tax break would free up $775 billion over the next ten years which would be used to provide care for children and the elderly.
But all these plans may just be Biden whistling in the wind if the nation’s legislators can’t reach across party lines. “Considering the Obama administration’s previous experience with Senate majority leader Mitch McConnell’s lack of interest in compromise,” said Parrott, “the Biden administration will need to develop a pretty robust administrative agenda as a ‘Plan B’.”