Joe Biden’s Tax Plan | What It Potentially Means for Real Estate

Joe Biden’s Tax Plan | What It Potentially Means for Real Estate

Today we’re talking about Joe Biden’s tax plan and what I think it means for East Bay real estate. Whether you voted for Joe Biden or not, we’re looking at a new tax plan. In this video, we’re going to cover some of the high level things that they’re talking about, and what I think those might mean for you, as someone who might be buying or selling real estate here in the East Bay.

Play Video

1. Affordable Housing

We’re first going to start off with affordable housing. Joe Biden has suggested that he’s going to put $640 billion over the next 10 years to help create a “financial assistance to help hardworking Americans buy or rent safe and quality housing.”

That’ll be really interesting because we’re going to hear where that money’s going to come from in a little bit. But that would be really fantastic if we could get some help building affordable housing because the economics of affordable housing here locally, just don’t work.

2. Housing Discrimination

The housing discrimination is another big part of what he ran on. He actually wants to create a US housing or homeowner and renter Bill of Rights which is very similar to the one we have here in California. That will probably reform the eviction and or foreclosure process further, and it’ll be really interesting to see what happens there.

As a landlord or lender in California, it’s very challenging to evict or to foreclose on someone. I used to be in the foreclosure space and I can tell you for a fact that a lot of people live in their homes for multiple years, and in some cases, actually 7-10 years without paying their mortgage before they actually get evicted. So it’ll be interesting to see if that streamlines that process in any way. Or if it just further delays the situation.

3. Foreclosures and evictions

Specifically around COVID, he was quoted as saying “no one should face foreclosure or eviction because they are affected by the COVID-19 crisis.”

The estimates right now are somewhere around 60,000 foreclosures in the entire state. Obviously, the Bay Area will have some portion of that although historically, our area has very low number of bank-owned properties because our equity positions are so high and the value of the homes here locally are equally as high.

I don’t foresee us having a ton of foreclosures locally. But if people do continue to lose their jobs and get into financial trouble, you might see more people looking to sell quickly and that might start to shift the tide of the Sellers Market. Though, based on the above statement by the President Elect, the likelihood of a repayment program for over five years, a stay-on evictions, or simply an extension of the terms like what we have now. 

Regarding rentals, I feel that the rent control laws will slow the evection process significantly, especially in Oakland, Berkeley and Alameda. The likelihood of a huge surge of evicted tenants and vacant units is low. I don’t really see a large macro impact in our market. Though, I’m sure there will be the small “mom & pop” landlords that could feel some pain and end up selling.

4. Roll Backs of Trump Tax Cuts

Another about Joe Biden’s tax plan which will be really interesting to watch, especially for those who have already bought their homes is the rollbacks of the Trump tax cuts. Specifically, you will want to watch the rollbacks for mortgage interest and local and state taxes, meaning your property taxes in your first $750,000 of mortgage interest can be deducted.

Previously, we were allowed to deduct the whole interest payment on the home. Now, however, it’s just $750,000, which in our state, is still over the median priced home, though not by much. That said, for most homes that people are transacting on in Alameda, Oakland, and Berkeley, it’s going to be some portion of the total cost of their house but probably not the entire thing. In addition, this is probably one of the areas where they’re going to get funds to raise $640 billion to help build affordable homes.

5. $15,000 Tax Credits for First Time Homebuyers

I do have a lot of friends and clients who are looking to buy their first home who could probably take advantage of the $15,000 tax credit for first time homebuyers. In the past, they’ve had deadlines to them, and you’ve had to take them over two years. But with Joe Biden’s tax plan, it’s no longer going to have an expiration date so people will be able to use it over a longer period of time. In addition, this is apparently going to be a tax credit that actually gives you money at the closing table, as opposed to a credit when you actually file your taxes.

This means it could really help people in our state who are actually affected heavily by Coronavirus. For example, the lower wage earners will have a better chance at buying their own home, especially in areas where FHA financing and lower down payment financing is more than norm.

Here in the Bay Area, I do think it’ll help people shave a little bit off the top of closing costs. But again, to be competitive here, being at or above 20% is almost a prerequisite. So for someone who has that down payment saved up, that extra $15,000 on the closing costs might actually push some over the edge to be able to buy a home. I don’t think it’s going to bring a ton of new buyers into the marketplace who weren’t there, because the difference of 15 grand on the closing costs of a million dollar property is not substantial enough, in my opinion. So I don’t think it’s going to have a huge impact here locally, but in the surrounding areas and some other counties, I think it will.

6. Abolishment of 1031 Exchange

Lastly, as an investor myself, the abolishment of the 1031 exchange will be really interesting if you’re making over $400,000 a year. This abolishment is probably another way they’re going to fund some of the affordable housing initiatives they’re talking about. So if you’re a high income earner who also does 1031 exchanges, you want to watch that closely.

From how I see it, rent control is probably going to continue to get more tenant friendly. As a result, I think you’re going to see investors looking for markets that are more balanced in their tenant/landlord laws. This could push many to sell now while they can 1031 their money out of the area or out of the state. 

Ultimately, this could free up a bit of rental inventory that gets converted in single family but it’s hard to say until we know more about what the implications are going to be. The majority of rental units are owned by local investors and this may change the numbers for many of them. We still have to wait and see how that turns out and what the rules will actually say about who could still take advantage of a 1031 exchange.

I hope my video and blog about Joe Biden's tax plan has helped you.

If I can give you more context on the process of buying or selling your home, please do not hesitate to reach out. My information is below. 

Here’s to all your success!

Need more tips to help you succeed in the East Bay Real Estate Market?

Sign up for Two Minute Tuesday–market updates and stories about East Bay real estate (with the occasional puppy picture) from Hans and Kristin in two minutes, once a month.

Scroll to Top