The single most important determinant of the economic value of a business in real estate and mortgage is what? It’s the Federal Government. Let the last two years be your most recent demonstration. If you do not understand how DC works then you will constantly be reacting to changes instead of planning for them. Here’s a deep dive on what to expect from either administration tailored to real estate professionals. Know Better. Work Smarter. Be More Successful. Tim

Deep Dive

The presidential election is front of mind for many who need to think about how federal policy will affect their business in 2025 and beyond.  No matter who prevails in the election, there will be a new administration in January 2025.  That administration will come in with its own views on policy, its own priorities, and, its own personnel tasked with implementing those policy priorities.  A few thoughts on those priorities, and the political and policy environment that the new administration will be faced with, are below.

There exists little doubt that either party in the White House will continue to face significant challenges as to housing and housing finance.  The new administration will have to deal with an environment of already high prices, already in place assistance programs, already unavailable building sites and resources, already burdensome costs from state regulation and taxes and potential inflation or debt that frequently follows White House initiatives.  Both campaigns have put forward plans they claim will address housing issues.  Vice President Harris proposes to provide $25,000 in down payment assistance for first-time homebuyers.  The Vice President also would seek to spur home construction by providing tax incentives for builders to focus on lower cost housing that is sold to first-time homebuyers.  Her plan would also earmark $40 billion to foster innovation in home construction, in part by empowering state and local governments to identify new ways to finance construction of affordable housing.

For his part, former President Trump proposed to lower housing costs by “eliminating costly regulations” and lowering interest rates, as well as freeing up some federal land for housing construction.  The Republican platform also promised unspecified “Tax Incentives and support for first-time homebuyers.”  Both campaigns also recognize that state and local regulatory barriers may limit housing supply, but neither appears to have a specific plan to address those issues.  But putting those policy goals into practice may prove difficult.

As an initial matter, the new administration may face headwinds in staffing up quickly.  It is possible that, for the first time since 1997, a President will begin his term with the Senate controlled by the opposite party.  Throughout most of the country’s history that would not have mattered much; the general rule was that Senators from both parties would vote to confirm nominees (even where there was strong ideological disagreement) so long as the nominee displayed competence and good character.  But that has changed over the past decade.  In 2017 a substantial number of Democrats voted against Trump administration nominees based on ideological differences alone.  Many Republicans followed suit during the Biden administration.  Both of these party changes happened when the President’s party controlled the Senate at the start of a term, so they did not prevent the President from (mostly) filling high-ranking positions.  It is unclear whether the practice of voting against (or simply not giving a vote to) ideological opponents will continue if there is a President of one party and the Senate is controlled by the other.  History suggests yes.  In 2019, when Democrats retook control of the Senate, confirmations of executive branch appointees slowed substantially.  If this new practice continues in 2025, it could lead the new administration to seek Senate confirmation for only the most senior leaders of an agency (i.e. cabinet-level appointments), and instead use a variety of other methods to fill lower-level positions.  This bypassing of Senate confirmation could result in administration officials holding more extreme views on various issues than an official who had to go through the confirmation process would hold.

There are also questions about how effective the new administration will be in implementing its policy preferences in a way that is effective and long-lasting.  Part of this is because courts have been paring back agency authority.  Over the last few years, the Supreme Court has taken an increasingly skeptical view of assertions of agency authority.  The “major questions” doctrine prohibits an agency from taking action on issues of economic, political, or cultural significance without express authorization from Congress.  And this past term the Supreme Court reversed nearly forty years of precedent that required courts to defer to an agency’s reasonable interpretation of an ambiguous statute.  These rulings, and the direction of administrative law generally, suggest that agencies are constrained in the actions they can take without clear authorization from Congress.  Many attempts by the Biden administration to enact substantial regulations have been put on hold by courts.  Courts have paused the implementation of new rules around the Community Reinvestment Act, the CFPB’s attempt to radically reduce late fees that can be charged by credit card providers, and many others.  The Securities and Exchange Commission voluntarily stayed its climate disclosure rules while litigation is pending, perhaps suggesting that it does not believe the rules will be upheld (otherwise, why not ask regulated entities to begin complying with the rule?).

Appointees still retain substantial authority, not the least of which the enforcement power that can, at a minimum, cause regulated entities to incur substantial expense.  Agencies can still continue to issue policy statements, guidelines, and interpretive documents that all affect the conduct of regulated entities.  But a combination of courts policing the boundaries of administrative authority, combined with a newfound willingness by regulated entities to challenge regulations, suggest that the new Presidential administration may face substantial roadblocks in using aggressive agency action to implement policy goals.

The exception is perhaps in the housing space.  FHFA is conservator over Fannie and Freddie, and Treasury is majority owner.  Between the two of them they can have a substantial impact on housing policy without worrying about administrative law issues (for the most part).  Other mortgage programs are similarly more free to set policy since they act as commercial counterparties rather than regulators; financial institutions are free to choose to participate in the programs those agencies administer, so the regulatory checks on them are substantially less.  But this greater flexibility is a double-edged sword; the ease with which the new administration can set policy in one direction applies to the next administration that wants to set policy in the exact opposite direction.

It is also unclear how this new administrative law paradigm will impact the banking agencies, which have the relatively free form “safety and soundness” charge, and authorities substantial enough to deter most regulated entities from challenging their actions in any but the most extreme circumstances.

Another limiting factor is that many of the candidate’s policy aims can only be implemented by Congress.  Limitations on an agency’s authority to change regulations would not apply to those same changes being enacted through legislation passed by Congress.  Similarly, most if not all changes to tax policy (such as giving tax credits for real estate purchases) would need to be implemented through legislation.  While a number of bipartisan bills were passed during the Biden administration, getting things through Congress is more and more difficult these days, and it is possible that residual acrimony from the election could further stymie efforts to enact the President’s agenda through legislation.

That does not mean you should not concern yourself with who will end up filling high level positions in the next administration.

At the outset, it is important to remember that filling executive branch positions is a political decision just like nearly everything else the President does.  This usually requires complex balancing of public, congressional and personal pressures— that include business or consumer group leaders as well as state and local preferences.  In many instances, some positions simply fall to the bottom of a list in favor of acting staff only because political considerations make filling it difficult.  For example, throughout the Biden administration there has only been an acting Comptroller of the Currency because the administration could not identify a candidate who could both satisfy the competing political pressures on the nomination and receive Senate confirmation.

Regardless of who prevails in the election, the selection of agency heads could have an outsized influence on the policy direction of the new administration.  Both parties are becoming more ideologically heterodox, with each having blocs that support aggressive government regulation of markets to address what the blocs perceive of as market failures and/or corporate excess.  The fate of FTC chairwoman Lina Khan is a great example of this dichotomy playing out.  Chairwoman Khan is a Biden administration appointee and an ideological ally of Senator Elizabeth Warren.  Khan has taken aggressive actions on antitrust issues, and has pushed back against the “consumer welfare” standard that has dominated both Republican and Democrat thinking on antitrust for two generations, arguing that in practice the consumer welfare standard does not adequately capture the costs imposed on consumers and competition.  But a number of major donors to the Harris campaign, most notably tech entrepreneur Reid Hoffman, have urged Vice President Harris to change leadership at the FTC if she wins, and go back to focusing on consumer welfare as part of antitrust enforcement.  This is in contrast to statements made by Vice Presidential nominee J.D. Vance, who has previously said that “I guess I look at Lina Khan as one of the few people in the Biden administration that I think is doing a pretty good job.”  This creates the strange situation where Chairwoman Khan may have more power and influence in a future Trump administration than she would in a future Harris administration.

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A spurious  quote about the biggest trouble with governing is “events my dear boy, events.”  The next President will likely deal with developments from day one that distract attention from campaign promises and divert resources to deal with developing crises.  That is beyond politicians and policymakers simply changing their minds about what policies to pursue, and how to pursue them.  But the next administration may be particularly prone to set backs in court and particularly guided by the policy preferences of specific individuals who hold important positions in the administration.  Executives in industries highly sensitive to government policy—such as real estate and mortgage finance—should watch these developments closely to better understand the regulatory landscape in which their companies will be operating.