Republican Housing Policies: What History Tells Us

Republicans have traditionally favored policies that reduce regulations, lower taxes, and incentivize private-sector growth. During Trump’s previous administration, the housing market saw both booms and challenges.

For instance, the Tax Cuts and Jobs Act (TCJA) of 2017 introduced a cap on state and local tax (SALT) deductions, significantly impacting high-tax states like California and New York. While this move aimed to simplify taxes and stimulate economic growth, it indirectly reduced the attractiveness of homeownership in certain regions.

Another hallmark of Republican-led housing policies is the emphasis on deregulation. For instance, Trump’s administration rolled back key components of the Dodd-Frank Act, making it easier for smaller lenders to extend credit. While this provided opportunities for more Americans to secure mortgages, it also raised concerns about loosening safeguards against risky lending practices.

Economic analyst Diane Simmons from the National Housing Institute shares, “A Republican-led administration typically emphasizes deregulation, which could lower construction costs. However, reduced oversight may increase risks, such as predatory lending practices.”

The Potential Impact on Mortgage Rates

One of the first areas affected by political shifts is mortgage rates. Rates are heavily influenced by the Federal Reserve’s policies, which, in turn, are shaped by government priorities. During Trump’s previous tenure, mortgage rates remained historically low, driven by a focus on economic growth and loose monetary policies.

However, a new Republican-led administration may face a different economic landscape. Inflation remains a key concern in 2024, and combating it often involves raising interest rates. Federal Reserve Chair Jerome Powell, who oversaw monetary policy during both Trump and Biden administrations, has maintained that controlling inflation is essential for long-term economic stability.

Here’s a comparison of historical mortgage rates during key years of Trump’s administration and projections for 2024 based on Republican policy frameworks:

With Republicans prioritizing economic growth and inflation control, experts predict a potential increase in mortgage rates.

“While a Republican win may boost business confidence, it could lead to higher borrowing costs as the government manages inflation risks,” says Jonathan Reed, a mortgage advisor with the Financial Policy Institute.

Housing Supply and Affordability

Housing affordability has been a persistent challenge for many Americans, particularly in urban areas. Republicans have traditionally pushed for easing zoning restrictions and encouraging private-sector construction to increase housing supply. If Trump were to regain office, we might see initiatives similar to his Opportunity Zones program, which aimed to stimulate investment in underserved areas.

Opportunity Zones were designed to attract development by offering tax breaks to investors. While successful in some regions, critics argue that much of the investment went toward luxury developments rather than affordable housing. A recent report from the Urban Institute found that 65% of Opportunity Zone investments were allocated to high-end projects.

Potential Republican strategies to address housing supply include:

• Incentives for private developers to build affordable housing.
• Reductions in construction regulations to lower costs.
• Tax credits for first-time homebuyers to encourage market entry.

While these measures could stimulate housing production, they may also favor investors over average buyers, particularly in competitive markets like San Antonio.

Tax Policies and Their Effects on Homeowners

Tax reforms are another key area where Republicans could shape the housing market. During Trump’s previous term, the Tax Cuts and Jobs Act (TCJA) lowered corporate taxes and capped SALT deductions.

While beneficial for some, these changes made homeownership less attractive in high-tax states. A Republican win could lead to further tax code adjustments.

Key tax-related concerns include:

• SALT Deduction Cap: Will it remain or be expanded? The current $10,000 cap disproportionately affects homeowners in states like New York and California.
• Mortgage Interest Deduction: Changes to this deduction could affect homeowners with high-value mortgages.
• Capital Gains Taxes: Lower capital gains taxes may encourage property flipping, which can drive up prices.

According to Amy Douglas, a tax expert with Homeowner Financial Insights, “Republican tax reforms tend to benefit investors more than individual buyers. While this may stimulate market activity, it can widen the affordability gap for middle-income families.”

National Housing Market in Focus

A Republican victory in 2024 could shape the housing market across the U.S. in diverse ways. Nationwide, housing affordability remains a pressing issue, with the median home price reaching $416,000 in 2023, reflecting a 6.4% year-over-year increase according to data from Zillow. Major cities like New York, Los Angeles, and Dallas have seen significant variations in price trends, driven by local demand and economic conditions.

If Republican policies prioritize deregulation and development incentives, more housing projects may emerge, potentially alleviating supply constraints. However, rising mortgage rates—currently averaging 6.91% for a 30-year fixed loan—could temper affordability, particularly for first-time buyers.

Key Housing Metrics Across Major U.S. Cities

These statistics highlight the varied effects federal policies may have across regions. Urban areas with higher price points might feel the impact of tax reforms, while smaller, growing markets could benefit from deregulation and development-focused policies.

Nationally, buyers and investors should prepare for potential shifts in affordability and financing. Locking in lower interest rates early or exploring alternative loan programs may mitigate the challenges posed by rate increases. For sellers, understanding regional trends will be key to navigating the market effectively.

Pros and Cons for Buyers and Sellers

Pros

• Increased Housing Supply: Deregulation could lead to more developments, particularly in suburban areas.
• Economic Growth: Policies aimed at stimulating the economy may create job opportunities and boost consumer confidence.
• Investment Opportunities: Lower capital gains taxes may encourage real estate investment.

Cons

• Higher Mortgage Rates: Inflation control measures may increase borrowing costs.
• Tax Reform Uncertainty: Changes to deductions could affect affordability.
• Market Volatility: Political shifts often bring short-term instability, which can deter buyers and sellers.

Navigating the Housing Market in a Republican-Led Economy

For Buyers:

• Lock in Rates Early: If you’re considering buying, securing a mortgage before rates climb further is wise.
• Explore Loan Options: FHA, VA, and conventional loans may be affected differently by policy changes.
• Focus on Affordability: Ensure monthly payments fit within 28% of your gross income, even if tax deductions change.

For Sellers:

• Monitor Demand Trends: San Antonio’s growing population could keep demand high.
• Leverage Tax Benefits: Capitalize on current tax breaks before any reforms are implemented.

For Investors:

• Target Opportunity Zones: Look for areas that may benefit from renewed investment incentives.
• Diversify Holdings: Consider a mix of residential and commercial properties to balance risks.

The Bottom Line

A Republican-led government, particularly under Donald Trump, could reshape the housing market and mortgage rates in significant ways.

Deregulation and tax reforms may encourage investment and economic growth, but they could also introduce higher borrowing costs and affordability challenges.

Ultimately, careful planning and adaptability will be key to navigating these shifts and making sound real estate decisions.

Frequently Asked Questions

What happens to mortgage rates under Republican leadership?

Mortgage rates often rise as Republicans focus on inflation control and economic growth.

Will tax reforms make homeownership harder?

Changes to deductions like SALT and mortgage interest could impact affordability for some buyers.

Are Opportunity Zones effective?

While they encourage investment, they often prioritize luxury projects over affordable housing.

What should buyers do now?

Lock in rates, explore loan options, and prioritize affordability to mitigate risks.

Will property taxes increase?

Property taxes are set locally but could be indirectly affected by federal tax reforms.

How will home prices respond?

Prices in San Antonio may stabilize if supply increases, but rate hikes could limit demand.

Are first-time buyers impacted differently?

Yes, as first-time buyers often rely on affordability programs that may see changes under Republicans.