Will Donald Trump Save NYC Multifamily?

HCR is sets the rules, not DJT

Donald J. Trump's win in the presidential election has the potential to usher in meaningful changes for the housing industry. How fast Trump can unveil and implement policy will depend on whether Republicans can take both chambers of Congress. Extending 2018's Tax Cuts and Jobs Act (TCJA) is high on the agenda.  Trump could expand that policy by introducing housing development or home purchase tax incentives. Other policies like deporting undocumented immigrants and lowering interest rates rely less on the legislature and more on the executive office itself.

Though many believe a Trump victory should be good for real estate, some second and third-order consequences to his policies could produce adverse effects for players across the real estate value chain. The first of these effects is noticeable right away. On November 7th, the day after news outlets called the election for Trump, the 10-year treasury yield stood 65 basis points above its 3.65% yield on September 17th, the day before the momentous first rate cut of the cycle. It feels like every publicly traded real estate asset is surging in response to the election results, but not all that pumping is good news.

Analysts projected that the U.S. deficit would increase under both presidential candidates but slightly more under Trump. If treasury yields aren't so responsive to the movements of the fed funds rate and instead move to the beats of macro investor concerns, refinancing permanent bank loans could be just as prickly on January 21st, 2025, as it was on January 21st, 2024.

Trump's promise to firm up the border and make immigration orderly again will also affect the housing sector. 61% of construction workers in Texas are Hispanic, and 31% nationwide. Tighter immigration policies and widespread deportations will likely cause some shakeups in contractor teams. That means timelines will get extended, wages will get pushed up, and construction costs will increase. That will further hamper supply growth, which doesn't help Trump fight the affordability crisis.

Source: National Associate of Home Builders

Okay, And Now Tell Us About NYC

State and city of N.Y. officials determine how real estate purchases, property development, building renovations, and property management work in N.Y. The Federal Government does not have oversight. Therefore, it won't be Trump or any other U.S. president who implements a critical policy that "saves" distressed N.Y. multifamily investors. Trump won't step in and dismantle the HCR and build it back in his image. Trump's role as commander-in-chief enables him to prioritize legislation around tax reform (cuts), bank regulations, and lending.

The Trump administration will be able to exert influence on the capital markets, which will have real effects on local markets. When he passed his 2018 bank reforms (EGRRCPA) as president, Trump raised the $AUM threshold requirements for banks to be classified as "too big to fail." In reclassifying the banks, Trump exempted many smaller, community lenders from additional compliance measures enacted in Dodd-Frank's post-GFC reform. The 2018 reforms allowed community banks to get back to reallocating human capital and labor hours towards loan origination and client servicing instead of banking compliance work. Regulators stepped in after the wave of bank failures in 2023 (and, to a lesser extent, 2024) to tighten the screws once more on banks to prevent any future defaults. It will be interesting to see if Trump and his Senate can deliver reforms that acknowledge the recent bank runs while not limiting banking liquidity and credit capabilities. With the support of The Senate (and perhaps the House), Trump can influence the loosening or tightening of credit across the lending world. Since that includes community banks, Trump's election could mean more liquidity in lending markets in NYC.

Updating the tax code to refresh bonus depreciation could be an engine-starter for investors who were previously on the sidelines. Trump is entering office at a time when markets are still precarious about inflationary pressures. Some posit that his tax cuts won't re-coup the losses in tax revenue that they require. Incentivizing real estate purchases is a great way to increase taxes paid to the government and foster economic growth. Local counties will levy property taxes on owners, and new buyers will usually hire local vendors during and after purchases are completed. Bonus depreciation is down to just 40% of asset value in 2025. Getting that depreciation back up to 100% would make significant differences in real estate capital flows and make some deals pencil that otherwise did not for active real estate professionals.

New York's political regime is strongly oriented to regulate and protect consumers from bad business actors. This stance sometimes comes at the cost of innovation, risk-taking, and progress. Jeff Bezos almost built Amazon's HQ2 in Long Island City (LIC), Queens, in 2018. What would LIC have looked like today if Amazon had planted its flag there six years ago? How would Industry City look today if city council members had taken a chance?

Regulations are very important in society, but they often come at the cost of innovation. Commercial airplanes look and function very similarly to those of 40 years ago. The Department of Environmental Protection (EPA) in NYC tests water quality 500,000 to 600,000 a year. This focus and diligence prevents New Yorkers from ever fearing that they are gulping down contaminated, non-potable water, a real concern in several third-world countries. Safety is paramount, and I do not suggest that airlines take more risks, or that NYC's water supply get tested less. But if NY officials are saying there are problems that need solving, sticking to safe approaches that limit innovation may not be the path forward.

A Donald Trump presidency won't change the housing regulations that matter most to NYC multifamily investors. These regulations come from NYC & NYS and won't be changed by federal law (barring a federal law outlawing rent regulations). Trump will have to keep an eye on the rising cost of capital that tax cuts might engender. Further, he should keep a close eye on his immigration policy's impact on the construction industry because new construction is critical in fixing the supply and demand housing imbalances in the United States. Keeping the above in mind, New York multifamily investors should find something to gain from Trump's focus on tax cuts and monetary policy. Every little bit helps.

I am bullish on NYC multifamily.

Call me at 646 326 2220.

Best Regards,

Romain Sinclair