Multifamily and the 2020 Candidates: An Election Guide – Part I

In 2020, an election year, would-be nominees for the Democratic presidential ticket have presented competing visions of what housing policy could look like during their term. Some plans and proposals preserve the status quo, but others have profound implications for the multifamily sector and the real estate industry at large. In this first of a three-part series we examine plans proposed by Senators Bernie Sanders and Elizabeth Warren and former Vice President Joe Biden.

Bernie Sanders

In keeping with his position to the left of most Democrats, Sanders’ housing plans have the most radical implications for the industry. Sanders calls for spending $2.5 trillion to build 10 million units of affordable housing and $70 billion to repair existing public housing. He also plans to institute nationwide rent control, end homelessness, and streamline the process for receiving Section 8 vouchers.

While Lyndon B. Johnson’s Great Society programs—which created the Department of Housing and Urban Development—present the most recent example of such wide-ranging reform, no real precedent exists for the changes that Sanders proposes. To better understand the implications of a Sanders’ presidency for housing, one would need to return to the changes engendered by FDR’s New Deal—a bottom-up reimagining of American life.

Sanders’ plans to spend on new and existing housing stock and end homelessness would have a tremendous impact on the lives of American citizens. As for their impact on the real estate industry, they pale in comparison to those that would result from national rent control. Under Bernie’s rent control proposal, rent increases would not exceed 3 percent or 1.5 times the consumer price index, whichever number is higher. Unlike similar but less stringent laws passed last year in California and Oregon, no exceptions would exist unless an owner has made a “significant capital improvement” to a property.

The terms of every multifamily deal and the value of every multifamily asset in the country would need reevaluation if Sanders wins and passes such a plan. Of course, he would face headwinds from a Republican-controlled Senate and from more moderate members of his own party. If recent events in New York serve as precedent, his administration would also face legal opposition from real estate interests. Nonetheless, any multifamily professional should prepare to work in a reimagined and perhaps smaller industry should Sanders win.

Some of Sanders’ other housing proposals include:

• Evictions would require a “just-cause” across the country
• States and other jurisdictions would have the ability to pass and enforce even stricter rent control laws
• The federal government would provide a $2 billion grant to guarantee counsel to those facing evictions or foreclosures
• Sanders has pledged to fight gentrification and exclusionary zoning laws

Elizabeth Warren

Elizabeth Warren has an established record of housing-related legislative work in the senate and a number of outlined plans. In 2018, Warren introduced the American Housing and Economic Mobility Act. If passed, it would appropriate$500 billion to build and rehabilitate affordable housing, funds that would be raised by lowering the threshold for the estate tax.

Warren intends to provide incentives to local governments to get rid of restrictive zoning laws and regulations such as parking requirements. The resulting reduction in construction costs would encourage developers to produce more housing. Additional goals outlined by Warren include constructing or improving 200,000 housing units on tribal land. The senator’s proposals would also create a new $4 billion “Middle-Class Housing Emergency Fund” for the construction of new homes for renters in the middle class.

A Warren presidency would have a muted impact on the multifamily space when compared to a Sanders term. Warren aims to make housing more affordable but does not call for rent control, unlike Sanders. Most of her reforms take the form of spending or technocratic incentives rather than drastic nationwide laws. For developers and owners, the reduction or elimination of restrictive zoning would increase construction in suburbs and wealthy neighborhoods. With fewer construction costs and increased density, Warren assumes rents will decrease. Under her plan consumers, builders, developers, and owners will all benefit from lowered costs.

Some of Warren’s other housing proposals include:

• Restructure the Community Reinvestment Act to better monitor the lending practices of local banks, guaranteeing they do not discriminate
• Create a down-payment-assistance program for black families, aiming to remedy the black-white wealth gap

Joe Biden

Unlike his two democratic rivals to the left, the former vice president has no formal housing plan as of February 2020. On Politico, he stands out as the only major Democratic candidate to have a “TBD” housing platform. His campaign website offhandedly mentions a commitment to affordable housing on its page for infrastructure and improving “Middle Class Competitiveness” but lacks the in-depth proposals presented by his rivals to the left.

Absent a plan, the media has tried to triangulate his possible attitudes toward public housing, rent control, and other legislative measures endorsed by other candidates. Sifting through his record and statements on the campaign trail has presented little clarity. As a senator, Biden voted for legislation that could have allowed for reductions to public housing stock. Perhaps the most concrete statement he has made about the subject was in mid-January 2020, when he said that no American should have to spend more than 30 percent of their income on housing. During the same event, he called for the expansion of Section 8 housing, and said that “housing should be a right for people”.

Biden has made no formal commitment to any of those statements, and follow-through or meaningful reform remains unlikely. Do not expect major disruptions to the existing housing market or real estate industry under a Biden presidency.

This is the first in a series examining the housing plans of all the major presidential candidates and their impact on the multifamily industry. If you would like to receive these insights straight to your inbox, sign up below. In the meantime, stay tuned!

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