In the battle of Biden vs. Trump a lot of settled and not-so-settled housing sector rules and doctrines will be at stake. If Trump wins the move toward less regulation can be expected to continue while a Biden victory would likely mean the restoration of older rules and the institution of new ones.
But what, exactly, might change?
“The real estate and mortgage industries as we know them today are the byproduct of countless rules, regulations, and court decisions,” said Rick Sharga, Executive Vice President with RealtyTrac, a leading source of investor leads and real estate data. “Change the regulatory system and the way we buy, sell, rent, and finance real estate could be very different.”
To see the importance of what’s going on you have to think about the tax code. A few words here or there can restructure entire industries. Ditto for real estate rules and regulations.
From Trump we have the record of his actions while in office while with Biden we have the “Plan For Investing In Our Communities Through Housing” to replace a number of Trump initiatives. Here’s a look at where some of the battles might be fought if there’s a change of Administrations.
Adopt the California Homeowner Bill of Rights for use nationwide.
The California legislation contains a number of deadlines and requirements before lenders can begin a foreclosure. For example, lenders must explain foreclosure options to borrowers, wait at least 90 days before beginning a foreclosure action, and have a single point of consumer contact. There are tenant protections for those renting properties facing foreclosure as well as limits on the ability of lenders to charge modification fees or foreclose while a borrower is complying with a “loan modification, forbearance, repayment plan, or other foreclosure-prevention option.”
Adopt the “Legal Assistance to Prevent Evictions Act of 2020.”
This legislation, sponsored by Rep. James E. Clyburn (D- SC), an important Biden ally, would provide grants to fund legal representation for tenants facing foreclosure if enacted.
Support inclusionary zoning.
There’s a growing trend to eliminate single-family zoning. In Oregon, as an example, single-family zoning has been eliminated in cities with at least 25,000 people. In New Hampshire, homeowners in many cases can build accessory dwelling units (ADUs) up to 750 sq. ft. regardless of traditional zoning.
The idea is to allow more legal units for lots now restricted to single-family homes. For instance, an owner could construct an ADU on a quarter-acre lot to house a relative, create a short-term rental, or rent out by the month. There might be a duplex instead of a single-family home. Small investors are likely to support such options but not owners with multi-family properties, hotels, and motels.
A new tax credit for first-time buyers.
Under the Biden Plan, first-time homebuyers could receive a tax credit for as much as $15,000. The plan follows a similar effort established in 2009 through May 1, 2010. The purpose of the 2009 plan was to stimulate home sales while this time around it’s more of an effort to improve affordability in the face of rising home prices. If Biden is elected this plan is likely to be enacted.
A new renter’s tax credit.
The purpose is to assure that tenant costs for rent and utilities are held below 30%.
Establish a Public Credit Reporting Agency.
This might be the most innovative plank in the Biden platform.
If you’re in the market for a home or car, if you need insurance or hope to get a job, there’s likely a credit report involved. Credit reports are everywhere and with good credit individuals can get cheaper loans, better jobs, and less expensive insurance coverage.
Right now the industry is dominated by three major credit reporting agencies (CRAs) — Experian, TransUnion, and Equifax. Credit scores are derived from CRA reports by such organizations as FICO and Vantage. But what if there was a fourth CRA option, a federally-operated public credit reporting agency (PCRA)?
The PCRA proposal has not gotten much attention but if enacted would represent a substantial change for real estate buyers, sellers and investors.
The Biden plan says credit reports “often contain errors, they leave many ‘credit invisible‘ due to the sources used to generate a credit score, and they contribute to racial disparities. Biden will create a new public credit reporting agency within the Consumer Financial Protection Bureau to provide consumers with a government option that seeks to minimize racial disparities, for example by ensuring the algorithms used for credit scoring don’t have a discriminatory impact, and by accepting non-traditional sources of data like rental history and utility bills to establish credit.”
According to Demos.org, information obtained through a public credit reporting agency “will be used only for lending purposes, not employment, housing, or insurance. The federal government may not use credit information to make decisions about immigration status or for any purpose other than lending.”
It seems unlikely that Congress will prohibit the use of PCRA credit information for housing (think of landlords checking tenant credit histories) or employment (think of hiring someone who handles cash). Those who need such information could simply turn to traditional CRAs.
What does seem likely is free, 24-hour access to credit reports, as often as the consumer wants. Make no mistake, the PCRA proposal is a challenge to credit reporting agencies, one that could substantially impact their business if enacted.