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How will a Trump presidency affect NYC real estate?

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Donald Trump's name might be synonymous with real estate here in New York, but the president-elect said very little about his housing plans during the election. (Hillary Clinton stayed away from the subject almost entirely, too.) That said, of course, people are already speculating how Trump's presidency, and his very election, will affect the NYC housing market.

Jonathan Miller, appraiser and real estate market analyst, seemed to think that there will be a pause in movement, but just for a bit. 

"With any significant unexpected and historic event, the initial impact to housing can be seen in the form of a 'pause' until buyers have enough time to process it.... A 'pause' can be measured in days or months and market reaction can ultimately go against conventional wisdom," he said in a blog post about the election aftermath. "Before the election, the housing market was generally softest at the top over the 18 U.S. markets we cover. I believe inventory will continue to be more readily available at the higher end than for other segments. In New York, the slow down in sales was assumed to [be] caused by the pull back of foreign buyers. However this decline was equally matched by domestic buyers over the same period, so the foreign buyer decline has been a false narrative. Rather than the international buyer narrative, I attribute the New York sales slow down to the visceral view of new residential towers rising from empty lots. Construction lending nearly dried up at the beginning of the year so the pipeline will slow quite a bit over the next two years."

Now keep in mind that some of the most hotly debated issues—like the mansion tax increase for apartments over $1.75 million, for example—are decided on the state level, not the federal level, so Trump's presidency won't change what happens there. On the other hand, NYCHA and Section 8 vouchers are dependent on federal money, so it's worth watching what Trump and the Republican Congress do about that.

For now, some names are being bandied about for head of the U.S. Department of Housing and Urban Development but we'll have to wait and see.

Fewer international buyers?

Some say trepidation over Trump's presidency will lead to foreign buyers to stay away from investing in the city. “I’m concerned about capital flows. What will happen — will foreign investors continue to invest in New York City? In the United States?” Charles Bendit, co-CEO of Taconic Investment Partners, said during a panel at a REBNY event last week, which the Real Deal reported on.  “I think in the next several months, until people start to get somewhat comfortable, I’m concerned that condo sales might come to a screeching halt, at least as it relates to foreign investors coming in and buying," the magazine reported.

Other experts say New York is still a strong market for foreign investment regardless of who's president.

“The shock of the result will be replaced by a more nuanced appraisal of the strengths of the U.S. markets—there is so much demand for the U.S. luxury market domestically and internationally, mainly due to the significant outperformance of the U.S. economy compared to just about every other developed world economy,” Liam Bailey, head of residential research at London-based Knight Frank, a global real estate consultancy,  told Mansion Global.

Either way, it might just be a matter of having to wait and see, as Miller said.

Lower interest rates across the country (and in New York)

Though Trump has said little about his real estate-related plans, he did propose to loosen mortgage lending standards in a speech to the National Association of Home Builders (NAHB) in August, Business Insider pointed out.

"If he can figure out how to make a real estate boom without inflated prices through silly lending policies (which happened during the mortgage crisis), I’m sure that’s one of the first things he’s thinking in terms of how to put more money into the economy," says Ed Mermelstein, a Manhattan-based international real estate attorney.

Loosening lending standards and lowering the credit score required to qualify for a mortgage would boost mortgage lending in the short term, but it could lead to a potential bubble, experts say.

It may depend a lot on where you live. Ralph McLaughlin, Trulia’s chief economist, told Business Insider that home buyers in economically healthy Democratic states could be discouraged about the future of the U.S. economy, and become less interested in making big purchases. In economically stagnant Republican states, however, home buyers' confidence and demand may rise.

What will happen to your rents?

Again, this is hard to tell so early in the game. For now, RentHop points out, mortgage rates have been rising steadily since Trump's win, now standing at their highest rate since 2013 (3.8 percent in case you're wondering). If that continues, you can expect rents to increase, as more people get priced out of the sales market, says Lee Lin, co-founder of RentHop.

There might also be more trepidation about buying apartment in this unknown climate, which could lead to fewer rental vacancies, and put even more pressure on rents, he says. That said, "not everything is clear cut, though. Complicated things like the economy never are," says Lin.

New York also tends to be more insulated than the rest of the country when it comes to potential economic downturns (the fact that many of our buyers pay cash, and our co-ops leverage against fluctuations in the market both help), but immigration issues could affect the city. "There are  a lot of foreign nationals on F1 student visas and H1B work visas. If we take a very anti-immigration stance, a whole segment of the industry — like brokers, and companies that cater to ex-pats will hurt," he says. 

Of course, if those workers don't come over here, there could be more rental vacancies, which could put less of a crunch on rent. "Sometimes the short-term and long-term affects are at odds," says Lin.

What about affordable housing?

If Trump enacts drastic reductions in corporate income taxes or other taxes, it could hurt affordable housing, Alex Schwartz, professor at the Milano School of International Affairs, Management, and Urban Policy at The New School, told DNA Info. The reason: Much of the affordable housing being built now is paid for through low-income housing tax credits. That said, Schwartz told the site that there's  a growing movement among New York City advocates to use infrastructure spending to help the city’s public housing.

“If you’re able to use a tiny portion of new infrastructure spending on public housing, that would be really desirable outcome,”  Schwartz said.

"It's in his best interest to find a way to make affordable housing part of the conversation, not just in New York City, but across the country. It would be great to see something along the lines of 421-a on a federal level," says Mermelstein. 

But for now, it's just conjecture. "We really have no idea what they’ll do on affordable housing, no one, on either side, has really spoken about that," adds Aleksandra Scepanovic, managing director of Ideal Properties Group.

According to CityLab, on the federal level, "two advances in fair housing under President Barack Obama’s administration could be up for review fairly early on. One is AFFH, which requires cities to assess how they distribute low-income housing in order to receive federal housing funds. Aspects of AFFH have yet to be implemented: the Assessment of Fair Housing tool for state governments, for example, will not receive final approval by the Office of Management and Budget before January 20. If AFFH is to succeed, President-elect Trump will have to finish what President Obama started."

The other big Obama administration achievement is the Supreme Court's decision in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, "in which the Court affirmed that 'disparate impact' is a category of racial discrimination prohibited by the Fair Housing Act. The decision means that housing practices that disproportionately negatively affect a minority group are illegal, even if that impact is not an explicit goal."

An emphasis on development

"Once a developer, always a developer," says Ideal's Scepanovic, who suspects that a Trump administration would be pro-development. "I can imagine he’ll be pro-new development, especially since he’s promised to invest in infrastructure."

(Note: Three of Trumps most famous developments on Riverside Boulevard have just voted to take his name off).

"You have to consider that his whole family is in the real estate business. He's not going to take away sources of income for his family and for the Kushner family. More importantly he understands what it takes to make the real estate industry stronger," says Mermelstein.

 

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