Beyond the Ballot Box: Key Matters Multifamily Investors Should Be Aware Of Post-Election

Election years often shift investor sentiment, while some take a cautious approach others seek to capitalize on market fluctuations. Regardless of your perspective, key economic fundamentals — such as supply and demand, interest rates, and regulations — remain crucial for investors. Below, we’ll explore how the results of the 2024 elections may impact these factors.  As you explore this article, remember that it reflects the insights shared during the 2024 U.S. presidential campaign season. Please note that economic policies may evolve, and we cannot assure any specific changes or continuations.

Supply and Demand

In a 2022 study conducted by the National Multifamily Housing Council and National Apartment Association, it was determined there is a need for 4.3 million new apartment units by 2035 to address the growing demand and shrinking supply of affordable housing in the United States. The President-Elect has emphasized the importance of encouraging the development of new housing near major cities and suburban areas. He also highlighted the extensive federal lands currently underutilized, not designated as national parks or fulfilling a distinct role, as presenting a significant opportunity for housing development. This offers a potential solution to both land use inefficiencies and the housing shortage. Promoting the potential value of multifamily developments in desirable locations that are currently underutilized could drive up the value of these properties over time, potentially leading to significant returns for investors while mitigating affordability concerns.

Interest Rates

When it comes to interest rates, inflation is a key factor that influences the entire economic landscape, especially impacting multifamily real estate. The President-Elect has indicated his administration will focus on efforts to boost American energy production and control government spending aimed at  reducing inflation, which could have a ripple effect across various sectors. As inflation decreases, the cost of goods and services tends to lower, making multifamily housing more affordable for tenants with more available income to spend on housing costs; all of this in combination may potentially increase housing demand. Additionally, lower inflation often correlates with decreased interest rates, which can reduce financing costs for developers looking to develop new projects or refinance existing ones. This can enhance profitability, attract more capital into the multifamily sector, and stimulate competition for properties — ultimately driving valuations higher and offering stronger returns for owners and investors.

Regulations

In the context of regulations, policy decisions play a significant role in shaping the investment landscape, particularly for real estate. The President-Elect shows support for several regulations that could benefit investors, including reduced taxes on capital gains and income, expanded opportunity zones, and the continuation of 1031 tax-deferred exchanges. He has also emphasized reducing business regulations, which could ease the process of securing permits, streamline development timelines, and lower costs for new projects. During his previous term, then-President Trump signed into law the Tax Cuts and Jobs Act of 2017, which created Opportunity Zones to incentivize long-term investment in economically distressed areas. He has expressed interest in expanding this program further. Additionally, the 1031 exchange — a popular tool for deferring capital gains taxes — is likely to remain in place, offering a strategic advantage long-favored by real estate owners and investors. The President-Elect’s support for maintaining or even lowering capital gains taxes further bolsters the case for anticipating growth in the real estate sector.

As we move forward in the multifamily market post-election, it’s important to remember that the relationship between the political parties and market performance is not always direct or predictable. The true drivers of market strength are often broader economic and geopolitical forces. Historically, election periods bring temporary volatility, but once the dust settles, traditional market indicators tend to align more closely with economic fundamentals and investor sentiment than with the election results themselves.

Whether you’re a seasoned investor looking to diversify your portfolio or a curious beginner exploring investment options, multifamily real estate offers compelling opportunities. Investors seeking stable and reliable returns may find multifamily properties to be the more attractive option in today’s market environment. If you are interested in learning more about multifamily investing, please contact your investor relations professional or contact the investor relations team here.

Date Published 11/12

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Sources: CBRE, E&E News, EY, Forbes, HLC Equity, JP Morgan, Jay Parsons, Newmark, NBC News, NMHC, TORYS, Trout CPA